CoStar Group (CSGP +7.06%), they call it a platform. A marketplace. I see a fortress built on facts, on the relentless accumulation of property details. The stock, halved in six months – a brutal reckoning, perhaps, but one that doesn’t necessarily invalidate the foundations. The residential side bleeds, yes, but the commercial core… that remains, a solid, if unglamorous, thing.
These networks, these self-reinforcing cycles… Visa, Mastercard, they understand it instinctively. Merchants need buyers, buyers need merchants. A simple truth. CoStar has built something similar, a web of 8.5 million properties, tethered to the needs of 230,000 professionals. More data attracts more users, more users refine the data. It’s a hungry machine, this one, and it cares little for sentiment.
Thirty-Eight Years in the Stone
Nearly four decades spent gathering dust and details. That’s the moat here, not some fanciful brand or fleeting innovation. Five billion dollars worth of verified property information. A broker who abandons CoStar doesn’t simply change providers; they willingly step into the dark, forgoing the baseline that defines the industry. It’s a quiet form of dependency, a subtle coercion.
The renewal rates tell the tale. Ninety-three percent quarterly for CoStar, a near-perfect monthly renewal for Apartments.com. “Sticky” doesn’t begin to capture it. It’s more akin to being cemented in place, a necessary cost of doing business.
And the margins reflect this quiet power. Forty-seven percent in the information and marketplace segment for the third quarter of 2025 – a healthy yield, boosted by a market that, for now, cooperates. Twenty-three percent growth in CRE transaction volume, fueled in part by the insatiable appetite for data centers. It’s a cold calculation, but it works.
A Price for Pride
The disconnect between CoStar’s underlying strength and its stock price is largely a consequence of ambition – the reckless pursuit of Homes.com. Eight hundred and fifty million dollars poured into a residential portal, a direct challenge to Zillow. A costly gamble, and one that, thus far, has yielded little return. It’s a familiar story – the established power, blinded by its own success, reaching for a prize that refuses to be taken.
Three billion dollars invested, and Homes.com still struggles to breathe. Breakeven isn’t expected until 2030 – a long wait for a company accustomed to immediate results. The activist shareholders, predictably, demand a course correction. Management, with a grudging acquiescence, agrees to trim the investment by over three hundred million dollars. A retreat, masked as prudence.
This recalibration is projected to lift adjusted EBITDA to around $770 million, an eighty percent increase from 2025. A $1.5 billion buyback is authorized, and the company holds nearly a billion in cash. A comfortable cushion, even in turbulent times.
The stock currently trades at 23 times the 2026 EBITDA forecast – an attractive valuation, given CoStar’s historical range. The fourth-quarter earnings report, due on February 24th, should provide a clearer picture of the cost-cutting measures and widening margins. It will be a telling moment, a glimpse behind the fortress walls.
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2026-02-19 14:52