CoStar Group’s Strong Buy Rating Backed by Strategic Acquisition and Solid Financials

Analyst Nicholas Jones CFA of JMP Securities maintained a Buy rating on CoStar Group (CSGP – Research Report), retaining the price target of $110.00.

Nicholas Jones CFA has given his Buy rating due to a combination of factors, including CoStar Group’s strong financial position and its history of strategic acquisitions. The firm’s significant cash reserves, amounting to approximately $5.2 billion as of the fourth quarter of 2023, provide a solid foundation for its latest move to acquire Matterport. This acquisition is viewed as a strategic progression for CoStar Group, further cementing its leading role in the rapidly evolving real estate sector, where technology and artificial intelligence are becoming increasingly important.

Moreover, the transaction to purchase Matterport, a prominent player in 3D digital modeling and AI for real estate, is valued at around $1.6 billion and is expected to strengthen CoStar’s market position. Despite the anticipation that the acquisition may dilute EBITDA margins in the short term, the long-term outlook based on Jones’s 10-year discounted cash flow (DCF) model is positive. The model incorporates a weighted average cost of capital (WACC) of approximately 9%, a terminal EBITDA multiple of 33x, and adjusted EBITDA margins of 43% by 2034, supporting a price target of $110 and underscoring the Buy rating for CoStar Group’s stock.

In another report released on April 18, RBC Capital also maintained a Buy rating on the stock with a $109.00 price target.

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CoStar Group (CSGP) Company Description:

Founded in 1987, CoStar Group, Inc. is based in the District of Columbia and provides information, analytics, and marketing services to the commercial real estate industry. The company offers its services through three divisions: Information and analytics, Online marketplaces, and Commercial property and land.