$0.00
$19.00
bear $0.00
base $7.50
bull $19.00
margin of safety $3.50
market price* $30.82
Zillow Group runs the largest U.S. home-shopping audience (Zillow, Trulia, StreetEasy) and earns money mainly from Premier Agent and other subscriptions and lead fees paid by agents, plus rentals advertising and Zillow Home Loans mortgage originations. Revenue was $2,583M in 2025, up 16% from $2,236M, and $1,480M in the first half of 2026, up 18%. How we measure earnings. We start from operating cash flow, remove the swings in working capital (notably mortgages Zillow Home Loans funds and holds briefly before sale, $227M in 2025, financed with short-term borrowings), then deduct stock-based compensation as a real cost and deduct the capital spending needed to keep the platform running (about $141M in 2025, including capitalized software and purchased intangibles, but excluding a one-time $100M payment for the Redfin rentals syndication deal). The result per share: about -$0.71 in 2023, -$0.52 in 2024 and +$0.24 in 2025. Earlier years are not used: 2019-2022 were dominated by the Zillow Offers home-buying business, which has been wound down and is a different business. Stock compensation is the key item: $390M in 2025 against $368M of operating cash flow. What we credit. The 2025 level of about $60M is the base. The first half of 2026 corroborates the improvement: operating cash flow $211M vs $191M, stock compensation $169M vs $196M, and share count down to about 234M from 254M. We credit that one-time step up (about $50M, or roughly $0.47 per share in total) as a level already reached, and no further growth. Revenue growth, margin gains and lower stock compensation going forward are not yet a multi-year, downturn-tested record, so they are left out of the base case. Trailing owner-earnings growth in 2025 was not meaningful in percentage terms (from a loss to a gain); the base case assumes zero growth from here. Base case (about $7.50 per share): owner earnings of about $0.47 per share continue indefinitely with no growth, discounted at 6%. What keeps them going is the traffic and agent-subscription franchise, which has produced positive cash flow through the 2022-2025 housing slowdown. Bear case (about $0): owner earnings slip back to the 2023-24 level of roughly -$0.5 per share for a few years, as could happen if antitrust and competitive pressure erodes agent lead pricing (the company disclosed in its 2025 10-K complaints from the Federal Trade Commission, state attorneys general, Compass and CoStar alleging antitrust and intellectual-property violations), and stock compensation stays near $400M. We value the business at nothing rather than negative because cash and investments of about $1.3B (about $5.50 per share, not counted in any case) absorb those losses; the company does not owe more than it is worth. Bull case (about $19 per share): stock compensation keeps falling as it did in the first half of 2026, capital spending stays near $150M and revenue grows into a business earning about $1.20 per share by 2029, then holding flat. What could make this wrong: a court or FTC outcome that restricts the Redfin rentals partnership or Zillow's listing practices; a mortgage or housing-transaction downturn hitting agent budgets; or renewed stock issuance that offsets share buybacks. Note that we treat the cash pile as outside the valuation, so the shares carry more balance-sheet support than the value figures alone suggest. The margin-of-safety price is set at about half of base value because owner earnings are thin, have turned positive only once, and legal risk is open.