Morningstar | CoStar Group Is Poised to Increase Its Market Share
CoStar Group reported another strong quarter, and management improved its 2018 guidance, reaffirmed confidence in meeting its fourth-quarter adjusted EBITDA margin goal of 40%, and commented on possibilities for opportunistic growth. Revenue for the quarter was $306 million, an increase of 23% from the previous year, partly driven by the ForRent acquisition, while adjusted net income per share was $2.16. Sequential revenue growth was a bit slow at 3%, but the company should be able to increase organic growth as its salesforce focuses more on net new sales instead of transitioning ForRent customers. Along with third-quarter results, management updated its 2018 guidance for revenue to $1.183 billion-$1.189 billion compared with a previous outlook of $1.18 billion-$1.192 billion and $965 million in 2017. Additionally, the new 2018 adjusted EBITDA range is $404 million-$408 million, compared with a previous outlook of $395 million-$405 million and 2017 adjusted EBITDA of about $280 million. We don't expect to make a significant change to our $357 fair value estimate for wide-moat CoStar Group.CoStar has often surprised us with its growth, and it looks like some additional growth opportunities may be in the company's future. Management commented on Moody's downgrading the credit rating of peer RentPath and the increasing gap between visitors to CoStar's listing sites and RentPath. A virtuous cycle of more site visitors increasing the value of advertising on CoStar's sites strengthens the company's competitive advantage, while any stumble from RentPath would be a windfall. CoStar management also mentioned that it is considering multiple acquisition deals. These deals are supposedly small firms with technology or capabilities that CoStar hopes to leverage across its entire platform and that could increase the company's international exposure, similar to the firm's recent acquisition of Realla.
CoStar Group is participating at the Management Behind the Moat conference held at Morningstar’s Chicago office on Nov. 7-8, 2018. If you are interested in attending the conference, please reach out to your sales representative for registration information.
CoStar Group provides information, analytics and online marketplace services to the commercial real estate and related business community through its database of commercial real estate information covering the U.S., the U.K., and parts of Canada, Spain, Germany and France. The company provides online marketplaces for commercial real estate, apartment rentals, lands for sale and businesses for sale. The company operates within two operating segments, North America and International, and its services are distributed to its clients under subscription-based license agreements that renew automatically, a majority of which have a term of one year.
Morningstar, Inc. is a leading provider of independent investment research in North America, Europe, Australia, and Asia. The company offer an extensive line of products and services for individual investors, financial advisors, asset managers, and retirement plan providers and sponsors.
Morningstar provides data on approximately 530,000 investment offerings, including stocks, mutual funds, and similar vehicles, along with real-time global market data on more than 18 million equities, indexes, futures, options, commodities, and precious metals, in addition to foreign exchange and Treasury markets. Morningstar also offers investment management services through its investment advisory subsidiaries and had approximately $185 billion in assets under advisement and management as of June 30, 2016.
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