CoStar Group, the commercial real estate data and listings giant, is facing pressure from one of its largest shareholders, Third Point LLC, to refocus and initiate what it calls “meaningful self-help.” In a Q1 2025 investor letter dated April 30, Third Point CEO Daniel Loeb criticized CoStar’s recent capital allocation strategy—particularly its aggressive expansion into residential real estate—and suggested the company’s stock has underperformed because it's trying to dominate too many sectors at once.

Third Point, which holds nearly 2 million CoStar shares, expressed concern that the $3B+ investment into Homes.com, acquired in 2021 for $156M, has distracted from the company’s strong and profitable core businesses—namely Apartments.com, LoopNet, and its flagship commercial real estate data services. According to Loeb, these residential ambitions have reduced earnings by as much as 80% and clouded the value of CoStar’s high-margin commercial platform.

Despite the public criticism, CoStar maintains confidence in its strategy. A spokesperson pointed to positive financial performance in late 2024 and Q1 2025 and emphasized ongoing efforts to streamline the sales force, including the creation of a dedicated Homes.com team. The company’s broader marketing push—featuring high-profile ads with celebrities like Jeff Goldblum, Dan Levy, and Morgan Freeman—has raised brand awareness, but investors like Third Point argue it may have come at too high a cost.

Adding fuel to the restructuring narrative, CoStar underwent a board shake-up earlier this year. In partnership with both Third Point and fellow investment firm D.E. Shaw, the company appointed three new directors—including a new board chair—and created a capital allocation committee aimed at reassessing executive compensation and reining in spending, especially on residential marketing.

Analysts believe these governance moves are likely targeted at tightening CoStar’s focus on its core commercial strengths while improving profitability and restoring shareholder value. As part of the transition, CoStar also executed workforce changes—laying off around 120 employees in Richmond, Virginia, while announcing plans to hire 1,000 new workers for strategic roles elsewhere.

Loeb, while still complimentary of CoStar’s fundamental assets and potential, implied that management must prove its ability to better allocate capital in the months ahead. He noted that CoStar’s stock—once a star performer rising from under $5 in 2010 to $90 in 2020—has remained flat for the past five years, even as broader markets have surged. Third Point has agreed to a standstill agreement with CoStar, set to expire within a year, and expects to see measurable improvement before the end of 2025.

If CoStar can scale back Homes.com losses and refocus operational efficiency, Loeb projects that the company could grow earnings more than sevenfold, reigniting investor enthusiasm and “setting the stage for the stock to regain its star status.”