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Price: $32.00
Fair value: $53.00
Discount: 39.6%
Uncertainty: High
LSEG rating: 2.36
Moat: Narrow
Next earnings: 2026-10-27
Next earnings is estimate: No
Company name: CoStar Group
Sector: Real estate data & marketplaces
About: CoStar Group sells real estate information and runs online real estate marketplaces. It reports two segments. Commercial Real Estate includes the CoStar database and analytics, which brokers, owners and lenders buy by subscription, the LoopNet listing marketplace and other services such as Ten-X auctions; it had $481 million of revenue in Q2 2026. Residential Real Estate includes Apartments.com, where landlords pay to list rentals, and Homes.com, where agents pay for advertising, with $444 million of revenue in Q2 2026. In August 2026, CoStar bought Zonda, a new-home data and marketplace company, for $800 million in cash. Most revenue is recurring subscription and listing fees. For years, CoStar spent heavily on Homes.com marketing to win home search traffic, and in 2026 it cut this spending to raise profit.
Thesis: The market prices CoStar at a discount because it doubts that the large spending on Homes.com will pay off, and it fears that AI search can weaken listing marketplaces and data subscriptions. Revenue growth is slowing: in July 2026, CoStar cut its 2026 revenue outlook to $3.715 billion to $3.755 billion from about $3.8 billion, and net new bookings of $69 million in Q2 were about 26% lower than a year earlier. The stock fell about 14% after that report, and the CFO left at the end of July 2026. Activist investors Third Point and D.E. Shaw pushed for changes at the board and at Homes.com earlier in 2026. For the gap to close, CoStar must show that profit grows while revenue keeps growing at double digits. The checks are full-year adjusted EBITDA within the $780 million to $820 million outlook, a Residential segment that stays profitable after it turned positive in Q2 2026, net new bookings that grow again, and AI products such as Homes.com Ai and Apartments.com Ai that raise leads and keep customers. The first test is the Q3 2026 report on October 27, 2026, with guided revenue of $935 million to $945 million and adjusted EBITDA of $190 million to $210 million. The full-year report and 2027 outlook in February 2027 are the next test. If profit and bookings both improve, the gap can close slowly over 2027 and 2028. The main risk is that AI tools from large technology companies take traffic from Homes.com and Apartments.com.
Risks: AI search tools can change how people search for homes and rentals, and how brokers get data. If large AI platforms send traffic around Homes.com and Apartments.com, the value of paid listings falls. CoStar launched its own AI tools in 2026, and their effect on revenue is not proven yet. Revenue growth slows. CoStar cut its 2026 revenue outlook in July 2026, and Q2 net new bookings were about 26% lower than a year earlier. Management said the fall came from its own choices to improve efficiency, but lower bookings lead to slower revenue later. Homes.com competes with larger home search sites, and the Residential segment lost money until Q2 2026. If spending cuts weaken its traffic, the past investment loses value. If CoStar raises spending again, profit falls. Management changes. A new CFO started on July 31, 2026, a new President of Homes.com in September 2026, and activist investors pushed for board changes earlier in 2026. Changes in strategy can add cost and risk. Commercial real estate weakness, such as high office vacancy, can slow subscriptions from brokers, owners and lenders.
Balance sheet: Cash: $1.3B Debt: $1.0B Net cash: $266M EBITDA, last 12 months: $607M Undrawn credit line: $1.1B, to May 2029 Debt due within 12 months: $0.0M Last debt due: 2030 CoStar has more cash than debt. Its only debt is $1.0 billion of 2.800% senior notes due July 15, 2030. Cash is cash and cash equivalents at June 30, 2026, down from $1,633 million at December 31, 2025, because CoStar bought back $589 million of shares in the first half of 2026. In August 2026, after the balance sheet date, it paid $800 million in cash for Zonda, so cash fell below the debt before Q3 cash flow. EBITDA is adjusted EBITDA for the four quarters to June 2026; GAAP EBITDA was $380 million. Nothing was borrowed under the $1.1 billion revolving credit facility, which matures on May 24, 2029. The share buyback program approved in December 2025 allows up to $1.5 billion of repurchases. As of 2026-06-30.
Checkpoints: Oct 27, 2026: Q3 2026 results: revenue, bookings and Residential profit. Pending. Watch: Revenue within the $935 million to $945 million guide, adjusted EBITDA of $190 million or more and a profitable Residential segment pass; revenue below the guide or bookings that fall again fail. Feb 2027 (estimate): Full-year 2026 results and 2027 outlook. Pending. Watch: Full-year adjusted EBITDA within $780 million to $820 million and a 2027 outlook with double-digit revenue growth pass; a lower revenue outlook fails. Jul 2027 (estimate): Q2 2027 results: bookings recovery. Pending. Watch: Net new bookings higher than the $69 million of Q2 2026 pass; bookings that keep falling fail.
Recent events: 2026-10-01: CoStar said that it will report Q3 2026 results on October 27, 2026. 2026-09-14: CoStar named Felix Kusch, a European home search executive, as President of Homes.com. 2026-08-21: CoStar completed the purchase of Zonda, a provider of new-home data, homebuilder software and the NewHomeSource.com and Livabl marketplaces, for $800 million in cash. 2026-07-29: CoStar stock fell about 14% before the market opened after the Q2 report, because of the lower revenue outlook and lower bookings. Keefe, Bruyette & Woods downgraded the stock to Market Perform from Outperform and cut its price target to $29 from $41. 2026-07-28: CoStar reported Q2 2026 results. Revenue was $925 million, up 18%. Adjusted EBITDA was $184 million, up 116%, and adjusted EPS was $0.32. The Residential segment had positive adjusted EBITDA for the first time. Net new bookings were $69 million. CoStar cut its 2026 revenue outlook to $3.715 billion to $3.755 billion and kept its adjusted EBITDA outlook of $780 million to $820 million and its adjusted EPS outlook of $1.32 to $1.39. 2026-07-13: CoStar named Robin Rossmann, its Managing Director for Europe, as Chief Financial Officer from July 31, 2026. He replaced Christian Lown, who left the company. 2026-05-29: CoStar agreed to buy Zonda for $800 million in cash.