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For informational purposes only. Not investment advice.

CoStar Group Inc.

CSGP

HIGHLY FAVORABLE

May 23, 2026

Research Conclusion

CoStar is a wide-moat CRE data near-monopoly + dominant multifamily marketplace (Apartments.com) + #2 residential portal (Homes.com) trading at ~$33 vs. PWFV $48-58. The core business alone is worth ~$25-30/share standalone; the Homes.com option (108M monthly visitors, 26K subscribers, +1,225% YoY bookings growth) is essentially valued at $0 in current pricing. Activist overhang removed (Third Point exit April 2026); $700M buyback active; EBITDA hockey stick begins as Homes.com investment winds down through FY2030. Highly asymmetric R/R; bull case +112%, bear case shallow due to core business durability.

Company Overview & Moat Assessment

CoStar Group (NASDAQ: CSGP) is the leading commercial real estate (CRE) data and marketplace company with three businesses: (a) CoStar data platform — proprietary 38+ year CRE database with $5B+ invested and 1,500+ researchers; near-monopoly with 90%+ renewal rates; (b) Marketplaces — LoopNet (#1 commercial property; 6x traffic vs. competition), Apartments.com (#1 multifamily; 11-12% growth), STR hospitality; (c) Homes.com — being built to compete with Zillow ($3B+ invested; 108M monthly visitors; 26K subscribers; $16M annualized bookings growing >1,225% YoY). FY2025: revenue $3.25B (+19% YoY), adj. EBITDA $442M, GAAP NI only $7M (Homes.com investment drag). Andrew Florance is CEO/founder.

▲ Bull Case

  • ◆Homes.com achieves Apartments.com-like ramp: 200K+ subscribers by FY2030; $1B+ revenue; EBITDA contribution $300-500M → +112% from current
  • ◆EBITDA hockey stick to 27% margin by FY2030: Investment wind-down + scale economics + CRE recovery → EBITDA $1.8B; multiple 22x → $70+
  • ◆AI / data premium tier emerges: Proprietary 38-year CRE dataset powers AI products competitors can't replicate; 10-15% ARPU lift on core data subs → +25-35%

▼ Bear Case

  • ◆Homes.com plateaus at 50K subscribers: Bookings stuck at $50M; investment continues longer than planned; option valued at zero → -9% to flat
  • ◆CRE recovery delayed by rate cycle: Core revenue growth slows to 9-10%; LoopNet transaction revenue compressed → -6-15%
  • ◆AI / data substitution threat: Generative AI tools replicate basic CRE data; renewal rates compress 80%+ → gradual erosion -9-24% over 5 years
Primary Debate on Wall Street

“Bulls: SOTP valuation suggests $50+ standalone for core businesses; Homes.com option mispriced at zero; activist resolution removes capital allocation friction. Bears: Homes.com may be capital destruction; Zillow's residential moat is too entrenched; core revenue growth is decelerating; SBC drag is permanent. Decision-margin: do you believe Homes.com replicates Apartments.com's ramp curve (8-year +1000% revenue trajectory). The next 12-18 months of subscriber + bookings data is the convergence catalyst.”

Top Catalysts
  • ◆Homes.com 50K subscribers (Q3 2026)
  • ◆Homes.com 100K subscribers (Q1 2027)
  • ◆Q2 2026 FY26 EBITDA guidance (Aug 2026)
  • ◆Homes.com $50M annualized bookings (Q3 2026-Q1 2027)
  • ◆CRE market transaction volume recovery (2026-2027)
Top Risks
  • ◆Homes.com plateaus at <100K subs (30% probability, HIGH severity)
  • ◆CRE market downturn extended (25% probability, MEDIUM severity)
  • ◆AI/data substitution threat (20% probability, HIGH severity)

Full Memo Continues

5 more sections, locked

  • ●
    Valuation Range & DCF
    Base/bull/bear fair-value range, WACC, terminal growth, sensitivity to revenue + margin assumptions.
  • ●
    Risk/Reward Assessment
    Position-sizing framework with explicit upside/downside skew and entry conditions.
  • ●
    Management & Capital Allocation
    Multi-year capital-allocation track record, incentive alignment, and management readout.
  • ●
    Monitoring Framework
    What to watch each quarter — leading indicators and inflection signals tracked by the analyst.
  • ●
    Unresolved Questions
    Open analyst questions and follow-up research items — the depth signal.

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CoStar Group Inc. (CSGP) — Investment Memo | Margin of Insight