12:14 PM EDT, 10/02/2024 (MT Newswires) -- Zillow Group's ( ZG ) residential revenue is set to benefit from expected growth in existing home sales in 2025, however, the market has already priced in this rebound, especially as new challenges in execution arise, Morgan Stanley said in a note Wednesday.

The brokerage said it expects mid-single-digit growth for existing home sales in 2025, which could significantly boost Zillow's ( ZG ) residential revenue growth. However, affordability challenges could limit existing home sales growth.

Based on historical trends and the company's efforts to increase its market share, Morgan Stanley now expects Zillow's ( ZG ) residential revenue to grow by 13% in 2025, outpacing the growth in existing home sales.

The market anticipates this rebound, as consensus expects 12% residential revenue growth, leaving limited room for upside in 2025 estimates. While historical data suggests Zillow ( ZG ) could outperform existing home sales growth, new execution challenges loom.

The recent National Association of Realtors settlement, with potentially lower broker commissions and a new standard for purchase contracts across the country, may negatively impact residential revenue growth, the note said.

"All of that said, we would expect the company to benefit from any further reacceleration

in the housing market, as we estimate that every incremental 2% growth in 2025 existing home sales would drive a 3% upside to Zillow Group's ( ZG ) 2025 earnings before interest, taxes, depreciation, and amortization," according to the note.

Morgan Stanley raised its price target on Zillow Group ( ZG ) to $60 from $46 while keeping its equalweight rating.

Shares of the company were down more than 2% in recent trading.

Price: 63.20, Change: -1.45, Percent Change: -2.24