Residential Expansion
Costar’s Homes.com disrupts Zillow and gains meaningful market share with agent-friendly model.
CoStar Group: Real Estate's Digital Powerhouse
Transforming real estate with data-driven intelligence and marketplace dominance.
NASDAQ:CSGP
$81.690
Updated: May 02, 2025
Financials & Real Estate
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Bull & Bear Case
An overview of the main reasons to invest and the key risks involved.
Bull Case
SaaS Business Model
96% subscription revenue provides stability, with room for pricing increases.
Dominant Market Position
CoStar continues to lead in commercial real estate with high retention and pricing power.
Bear Case
Regulatory & Legal Risks
Potential antitrust or data privacy issues could impact business operations.
Competitive Market
Competition from alternative data providers and niche players could erode margins.
Macroeconomic Conditions
Economic downturns could lead to slower real estate activity and cancellations.
Executive Summary
The Platforms Commercial Real Estate Couldn't Breath Without
CoStar Group (NASDAQ: CSGP) is a global leader in commercial real estate information, analytics, and online marketplaces. Its ecosystem includes CoStar, LoopNet, Homes.com, Apartments.com, and Ten-X, offering property intelligence, marketing solutions, and transaction platforms for investors, brokers, lenders, and property owners. With a $300 trillion global real estate market as its playground, CoStar has built a proprietary database over 39 years, leveraging $5 billion in research and technology investments to maintain its industry dominance.
The investment case for CoStar Group is driven by its highly recurring subscription model (96% of revenue), a strong track record of double-digit growth, and strategic expansion into the residential sector. With Homes.com now the second-largest residential marketplace in the U.S., and growing international ambitions, CoStar is positioned to capitalize on increasing digitalization and data-driven decision-making in real estate. The company’s continued acquisitions, AI integration, and expansion into untapped markets make it a compelling long-term investment.
Investment Thesis
Overview of buy and sell case of the business.
Why Invest?
Key pieces of information about the business that you need to know about.
Dominant Market Position in Commercial Real Estate
CoStar is the undisputed leader in commercial real estate data and analytics, with a proprietary database covering over 7 million commercial properties. It serves top-tier institutional investors, brokers, and property owners, embedding itself as the industry’s must-have intelligence platform. With 94% renewal rates for clients with over five years of tenure, CoStar’s subscription revenue stream is highly resilient, even in economic downturns.
Residential Expansion – The Homes.com Disruption
While Zillow dominates online real estate, CoStar’s Homes.com has rapidly emerged as the #2 U.S. residential real estate marketplace, reaching 110 million unique visitors per month. Unlike Zillow’s "pay-to-play" lead model, Homes.com's "Your Listing, Your Lead" approach empowers listing agents, a differentiation that could drive significant adoption among real estate professionals. CoStar is making a $1 billion+ investment in residential, signaling its commitment to becoming a true multi-sector real estate giant.
High-Margin, High-Growth Subscription Business
CoStar benefits from a highly profitable SaaS-like model, with 80% gross margins and double-digit revenue growth for 55 consecutive quarters. Despite aggressive investments in marketing and expansion, CoStar has continued to expand EBITDA margins, demonstrating financial discipline alongside growth. Its robust balance sheet, $4.7 billion in cash, and minimal debt provides flexibility for strategic acquisitions.
Catalysts
The key events that could drive investment opportunities and shift markets.
Residential Expansion
Homes.com has already reached 148m unique visitors but the company is yet to monetise the platform fully. The residential strategy is currently in growth mode and investors still have monetisation to look forward to. For context, the residential opportunity is $15B, representing a massive growth opportunity. The launch of Homes.com’s paid subscription model will be a key test for its ability to challenge Zillow.
CoStar France Expansion
International growth in key European markets, particularly the upcoming launch of CoStar France.
AI & Digital Twin Integration
The Matterport acquisition will allow CoStar to enhance AI-powered property visualization, improving its value proposition.
M&A
CoStar has a track record of successful acquisitions. The residential initiative will likely occupy management's attention for the coming years but who knows what they are likely to do next. The company maintains a large cash balance of $4.9B, providing the flexibility to acquire opportunistically
Key Risks
Key pieces of information about the business risks that you need to know about.
Cyclical Sensitivity & Macroeconomic Conditions
Real estate markets are cyclical and sensitive to interest rates, economic downturns, and market sentiment. A prolonged downturn in commercial or residential real estate could impact advertising spending, transaction volumes, and overall demand for CoStar’s services.
Homes.com Execution & Monetization
CoStar is betting big on Home.com to challenge Zillow’s dominance, but monetizing the platform and attracting paid subscribers will be a challenge. While the agent-friendly model is gaining traction, it remains to be seen if it can scale into a billion-dollar revenue business.
Regulatory & Antitrust Scrutiny
CoStar’s aggressive expansion and acquisitions could attract regulatory scrutiny, particularly in data privacy and potential antitrust concerns. Competitors or policymakers may challenge its growing influence in commercial real estate data and online marketplaces.
Follow the Experts
Quickly navigate key insights from industry experts and leverage their knowledge and market intelligence.
Expert Insights
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“we’re seeing capital markets open a bit, the deal flow which has been 0 is coming back, commercial real estate is still in a recession…but it's coming back.”
Expert Insights
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“A key sales metric has turned positive after 26 months. CoStar’s repeat sales index showed sales prices across property types falling 0.4% month-over-month in January, but the firm said that’s largely because of small, low-price deals.”
Expert Insights
article
“Despite improving return-to-office numbers, the office sector still battles numerous challenges that are resulting in higher loan defaults.”
Expert Insights
podcasts
"What has been the result of CoStar’s multi-decade slog to digitize real estate been so far? 96% subscription revenues, 90% renewal rates, and >100% FCF conversion."
Investor Materials
Access the most recent investor updates published by the company.
Key Documents
CoStar Group 2024 Full Year Revenue Increased 11% Year-over-Year; Q4 24 Net Income Increased 13%, EBITDA Increased 43% & Adjusted EBITDA Increased 47% from Q3 24 | CoStar Group, Inc.
ArticleHomes.com Network Solidifies its Position as the Number Two Residential Real Estate Marketplace in the United States ; Board Approves Stock Repurchase Program ARLINGTON, Va. --(BUSINESS WIRE)--Feb. 18, 2025-- CoStar Group, Inc. (NASDAQ: CSGP), a leading provider of online real estate marketplaces,
Investor Presentation Q4 2024
PDFAnnual Report 2023
PDFExternal Insights
A curated collection of third-party content relevant to the company and sector to help inform your investment decision.
Commercial Real Estate
The CoStar Threat Part 4: The Strategy CoStar Could Use To Crush Zillow
ArticleIn the first article in the CoStar Threat series, I outlined the ongoing battle over agent commissions and the impact they would have on the property technology landscape. The second article explained why CoStar considered acquiring Realtor.
Team
Meet the experienced professionals leading our organization
Frank Simuro
Lisa Ruggles
Andy Florence
Christian M. Lown
What the Pro's Are Asking
Here are the questions that professional investors are asking before making an investment decision.
Can Homes.com truly compete with Zillow in the long run?
CoStar’s "Your Listing, Your Lead" model is more agent-friendly than Zillow’s, but Zillow has a well-established consumer brand and significant network effects. Investors are watching closely to see if Homes.com can convert traffic into paying customers.
How does CoStar manage the cyclicality of real estate markets?
With a 96% subscription revenue model, CoStar is more resilient than transaction-based companies. However, macroeconomic downturns still impact growth, and interest rate fluctuations could affect demand for its services.
How sustainable is CoStar’s double-digit revenue growth?
CoStar has delivered 55 consecutive quarters of double-digit growth, but can this continue? The success of Homes.com, international expansion, and AI-driven enhancements will be key growth drivers.
Will AI and Digital Twin technology create new revenue opportunities?
The Matterport acquisition positions CoStar at the forefront of AI-powered real estate visualization. Investors are questioning whether this can be monetized effectively in commercial and residential markets.
What are the biggest threats to CoStar’s competitive advantage?
Investors are wary of new competitors leveraging AI and alternative data sources. Additionally, regulatory scrutiny and potential antitrust actions could limit CoStar’s ability to scale further