Why CoStar Group Stock Wilted on Wednesday
Key Points
The real estate tech specialist posted double-digit increases in key fundamentals.
Market professionals tracking the stock were expecting higher profitability, however.
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CoStar Group (NASDAQ: CSGP) stock hit a bump on Hump Day, with its share price diving by nearly 10% across the trading session. The company, which concentrates on real estate tech solutions, was hit with an investor sell-off after releasing its latest set of quarterly figures. That decline was particularly glaring on a day when the S&P 500 index closed flat.
Bottom-line miss
For its third quarter, CoStar's revenue was $834 million, which was a sturdy 20% higher year over year. That was on the back of a near doubling in net new bookings; these rose by 92% to $84 million.
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Net income not according to generally accepted accounting principles (GAAP) rose less steeply, advancing by 10% to $97 million. In per-share terms, that non-GAAP (adjusted) bottom line was $0.23.
Unfortunately, analysts tracking the company were expecting it to do better with profitability. As a group, they were collectively estimating it would book an adjusted net profit of $0.18 per share. On a brighter note, CoStar beat on the consensus revenue projection, which was slightly over $812 million.
In the earnings release, the company attributed the improvements to strong performance at what's arguably its most high-profile asset, the homes.com website.
In-line guidance
For the entirety of 2025, CoStar is guiding for adjusted net income of $0.82 to $0.84 per share; the analyst consensus is $0.82. Its revenue projection also sits slightly above the average pundit estimate, at $3.23 billion to $3.24 billion, against the collective forecast of a bit below $3.23 billion.
The company raised its guidance for adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) in the full year. It's now anticipating $415 million to $425 million, which is an increase of $40 million at the midpoint of that range.
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Eric Volkman has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends CoStar Group. The Motley Fool has a disclosure policy.
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