CoStar Doubles Its Profits but the Stock Keeps Falling — Can Homes.com Spending Ever Win Over Wall Street?

Shares of CoStar Group slid 4.5% to $33.40 on May 8, bucking a rising market, as investor frustration with the cost of building a home-search business overwhelmed what was, by most measures, a strong quarter. The stock is now trading near its 12-month low of $33.31, down roughly 65% from its 52-week high of $97.43.

The Numbers Beat Expectations, but the Market Shrugged

Q1 revenue hit $897 million, up 23% year-over-year. Net income flipped to $3 million from a $15 million loss a year ago. Adjusted net income rose 49% to $94 million, adjusted earnings hit $0.23 per share (up 53%), and adjusted EBITDA doubled to $132 million.

The EPS figure beat Wall Street's $0.18 consensus by nearly 25%. Yet the stock has drifted lower since results were published April 28, suggesting beats alone aren't enough.

Homes.com Is Growing Fast — but Still Losing Money

Homes.com revenue grew 58% to $26 million, with agent subscribers surging 205% to 35,175. That sounds impressive, but $26 million is a tiny fraction of overall revenue. The residential segment's adjusted EBITDA was still negative $29 million in Q1.

Management expects the residential segment to reach profitability in Q2 2026 — a promise investors have yet to see fulfilled. CoStar plans to spend $300 million on Homes.com in 2026, scaling down to $100 million by 2030. Until that spending converts to real profit, the stock pays a patience tax.

Wall Street Is Sharply Divided on What CoStar Is Worth

Wells Fargo lowered its price target from $40 to $33 and kept an "underweight" rating — essentially a sell call at current prices. Goldman Sachs cut its target to $54 but kept a "buy."

Stephens dropped to $42, Deutsche Bank to $44, and Needham to $50 — all post-earnings. The gap between the bears' $33 and the bulls' $67+ reveals deep uncertainty about whether Homes.com can eventually scale the way the company's apartment-listing business did.

The CEO Is Putting His Own Money In

CEO Andy Florance purchased 71,430 shares at $35.20 on May 1, spending $2.5 million and increasing his stake by 4.3%.

Total insider buying over the past three months: $3.5 million, with zero insider sales. That's a meaningful signal of internal confidence — but insider conviction and market conviction are two different things, and for now, the market wants proof, not promises.