After several months of weaker data, home sales reports finally picked up, giving investors renewed hope of a recovery in the real estate sector. However, there is no reason to start celebrating yet as other factors and issues need to be reconciled before the sky is clear for the industry. One month of positive data is not enough to offset quarters of decline.

Be that as it may, that doesn’t mean that no one could come out of this situation as a winner, as there is a more important trend behind the data that could produce long-term trends and upside potential in a particular real estate niche. This trend is likely to push the real estate services sector, particularly leasing and transaction services, to its limits.

That’s why stocks like Zillow Group Inc. NASDAQ:Z, SoFi Technologies Inc. NASDAQ:SOFIand even RE/MAX Holdings Inc. NYSE:RMAX could be next to record double-digit upside rates in the coming quarters, especially as the broader United States real estate market enters a secular growth and expansion cycle due to the following dynamics.

Zillow stock is receiving institutional support amid emerging real estate trends

Zillow Group today

Z

Zillow Group

$84.34 +0.57 (+0.68%)

(As of November 25, 2024 ET)

52 week range

$38.45

▼

$86.37

Price target

$70.33

During the last quarter, FMC LLC decided to increase its holdings in Zillow shares by up to 179.5%, bringing its net positions to a high of $325.3 million today, representing a 2.2% stake in the company corresponds. The reasons for this attribution are greater than recent sales figures.

Whether it’s a transaction or a lease (rental) agreement, Zillow acts as an intermediary, connecting agents and customers for a fee. With this in mind, cyclicality in each of these two markets is the driver of Zillow’s financials and ultimately its valuation.

According to its latest quarterly results, Zillow management has been increasingly focused on the rental segment and why it makes sense globally. With price-to-income ratios in today’s real estate market near all-time highs and mortgage rates back up to around 7%, there is currently very little demand for new homes.

Developers are aware of this, which is why building permits have declined in recent quarters to reflect this trend. As those divisions shrink, Zillow’s rental division will likely take a larger share of the company’s net revenue. According to Bloomberg, up to 36% of Americans are renting where they live, 50% more than before the COVID-19 crisis.

Because these trends could become decade-long themes, today’s price targets for Zillow stock may not yet reflect the upside potential that could exist in the future. However, the goals set by Jefferies Financial Group reflect some attractive offerings in today’s market.

By reiterating their Buy ratings and setting a $90 price target on Zillow stock, these analysts are immediately anticipating upside potential of up to 10% from the stock’s price today, not to mention a new yearly high. After a 110% rally over the last 12 months, investors can assume that there is enough upward momentum to handle the new uptrend.

SoFi Mortgages: The Key to Unlocking New Highs on a Potential Reversal

SoFi Technologies Today

SOFI

SoFi Technologies

$15.70 +0.10 (+0.64%)

(As of November 25, 2024 ET)

52 week range

$6.01

▼

$16.09

P/E ratio

157.02

Price target

$9.80

Let’s assume that the tenant land scenario does not materialize and that a healthy recovery occurs instead. Investors can likely lean on SoFi stock for a new uptrend. Considering the mortgage market index is currently at its 1996 low, any tailwind could boost the index significantly.

SoFi stock’s short interest is down 10.2% in the last month alone, showing signs of bearish capitulation in the face of all these bullish factors waiting to push the stock higher. Additionally, institutional buyers have stepped in to replace the bearish traders who decided to cover their short positions and avoid further problems.

The employees of State Street Corp. increased their holdings in SoFi stock by 1.7% as recently as November 2024, reaching a peak value of $142 million before this potential tailwind, representing a nearly 2% stake in the company. To support this positive assessment, Wall Street analysts have presented their earnings per share (EPS) growth forecasts.

Guidance is for $0.10 per share over the next 12 months, a doubling from today’s EPS level of $0.05 and enough to justify a similar increase in the stock’s valuation.

RE/MAX Stock: Discounts and Growth Potential Signal a New Rally

RE/MAX today

$14.04 +0.81 (+6.12%)

(As of November 25, 2024 ET)

52 week range

$6.94

▼

$14.31

Price target

$10.38

After a 45% rally over the past 12 months, there are reasons to believe RE/MAX stock will come out on top in all of these real estate trends. Whether tenants take over or buyers find a way to return to the table, this stock acts as an intermediary to make those connections a reality.

Just as Zillow is the platform, RE/MAX is the retailer. No matter how successful Zillow is, some of that momentum will end up on RE/MAX’s income statement. That’s why the stock is still 93.2% institutionally owned today and could see even more of the same soon given how cheap it’s trading today.

Price movements aside, RE/MAX stock trades at just a price-to-book (P/E) ratio of 0.6x, meaning investors are getting about a 40% discount to the company’s book value today, enough to to get everyone excited about the deal. In addition, the company’s low market capitalization of $395 million allows it to quickly achieve double-digit growth rates.

However the market plays out, as Zillow is destined to, this is an industry stock that could likely hit a new high soon.

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