CoStar Group is making a foray into residential real estate data after inking an agreement to buy Homesnap for $250 million in cash.
As a result of the acquisition, CoStar (CSGP) expects the number of paying real estate brokers and active agent users on its US platforms to quadruple from about 100,000 today to over 400,000. The number of US property listings available across CoStar’s brands will double from about 1.35 million today to over 2.6 million. The transaction is expected to close in 2020, pending customary closing conditions and regulatory approval.
Today, CoStar deploys an online and mobile software platform, which is used by 300,000 residential real estate agents, on an average of about 30 times a month. The number of active monthly users has grown at a compounded annual growth rate of over 40% since 2016, while marketing product sales have risen over 75% per year over that same period. Homesnap’s public residential real estate portal offers 1.3 million active property listings.
“The acquisition of Homesnap will enable us to enter a new space and expand the total addressable markets in which we can compete,” said CoStar CEO, Andy Florance. “The estimated value of commercial real estate assets in the US is $16 trillion. With the new addition of clients and information covering 90% of the estimated $27 trillion dollar US residential real estate market we are almost tripling the size of our addressable markets.”
Headquartered in Washington, Homesnap has 150 employees and is projected to generate about $40 million in revenue for the full year 2020, up 45% year-on-year.
CoStar shares are up 49% so far this year, and the stock still scores a Strong Buy analyst consensus backed by 7 unanimous Buy ratings. What’s more, the average analyst price target of $983.33 implies another 10% upside potential lies ahead over the coming 12 months.
In a bullish note, Needham analyst Mayank Tandon last month raised the stock’s price target to $1,000 (12.1% upside potential) and reiterated a Buy rating, as the analyst is confident that the company is on the right track to be the leading provider of information services for the commercial real estate and multifamily markets.
“CSGP remains a high conviction name in our coverage group for investors looking for a high-quality asset with a dominant market position and potential for strong multi-year revenue growth and margin expansion,” Tandon commented in a note to investors. “With a strong competitive position, rock-solid balance sheet, and proven track record of generating solid organic growth and supplementing it with accretive M&A, we remain positive on the shares.” (See CSGP stock analysis on TipRanks)
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