CoStar Group Earnings: Apartments.com’s and LoopNet’s Revenue Growth Rebounds

Wide-moat-rated CoStar Group CSGP reported a good set of numbers in the first quarter with non-GAAP EPS of $0.29, approximately 16% higher than the FactSet consensus estimate of $0.25. The shares of the company were up about 5% in response to the quarterly results. Its 2023 adjusted EBITDA guidance remained roughly similar, but its non-GAAP EPS guidance increased by approximately $0.15 to $1.21-$1.24 from $1.06-$1.09. Most of the increase in non-GAAP earnings guidance was due to higher interest income expectations on the substantial amount of cash (about $5 billion) that the company holds on its balance sheet. Overall revenue increased 13.1% on a year-over-year basis on the back of strong growth in the CoStar Suite, multifamily, and LoopNet segments. Annualized net new sales bookings, which is an indicator of future revenue growth, came in strong at $80 million for the first quarter, an increase of 17% over the first quarter of 2022. The adjusted EBITDA margin was recorded at 21.0% in the first quarter, down from 34.4% in the first quarter of the previous year largely because of the firm’s considerable residential investments. Overall, the first-quarter results were largely in line with our expectations, and we do not plan to change our $75 fair value estimate for CoStar Group.

The revenue growth in the multifamily segment rebounded sharply and achieved 20% growth in the first quarter as the demand for advertisement grew due to relatively higher vacancy rates for multifamily properties in the U.S. Management reported that the Apartments.com platform had over 43 million monthly unique visitors in the first quarter, and the business is expected to deliver 22% to 23% revenue growth in 2023. We expect the Apartments.com business to remain strong in the upcoming quarters given the fundamental outlook for the multifamily supply pipeline and vacancy rates.