Stock Analysis & Ideas

Could Compass Find its Way in 2021?

The robust housing market and higher agent productivity are fueling growth at Compass (COMP), as reflected through its back-to-back solid quarterly performance. The real estate technology company recently delivered stellar Q2 results that blew past consensus estimates and marked significant year-over-year improvement. 

Its Q2 revenues jumped 186% year-over-year to $1.95 billion and handily exceeded analysts’ estimate of $1.57 billion. Meanwhile, it reported a loss of $0.02 a share that compared favorably with the prior-year period’s loss of $0.77 a share. Furthermore, it came well ahead of the Street’s estimate of a loss of $0.13. (Read more: Compass Posts Narrower-Than-Expected Q2 Loss)

While Compass continues to deliver solid financial numbers, its stock is down approximately 21% since it listed on the exchange on April 1. (See Compass stock charts on TipRanks)

Nevertheless, Compass continues to expand its market share, which is encouraging. Notably, its national market share stood at 6.2% at the end of Q2. In comparison, Compass’ market share was 5.2% in Q1 and 3.3% in the prior-year quarter.

Moreover, Compass expects to deliver adjusted EBITDA profitability in FY22, a year sooner than its previous forecast. 

In response to its strong quarterly financials and improved outlook, Needham analyst Mayank Tandon said that Compass moved up its time frame to EBITDA profitability, providing “further confidence in the potential for the platform to scale.”

Tandon reiterated a Buy rating on the stock and increased the price target to $23 (44.5% upside potential) from $22, citing Compass’ market share gains and upbeat outlook. Moreover, the 5-star analyst raised his revenue and EBITDA estimates for FY21 and FY22.

Tandon summed up, “We believe that the higher-margin adjacent services revenue in areas such as T&E (Title and Escrow), mortgage services, real estate marketing, etc will continue to scale as attach rates rise and the product suite grows.”

On TipRanks, Compass stock has a Strong Buy consensus rating, based on 5 Buys and 1 Holds. The average Compass price target of $23.00 implies 44.5% upside potential to current levels.

Disclosure: Amit Singh held no position in any of the stocks mentioned in this article at the time of publication.

Disclaimer: The information contained herein is for informational purposes only. Nothing in this article should be taken as a solicitation to purchase or sell securities.

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