Stock Analysis & Ideas

Let’s Learn More about Recently Listed Compass

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Real estate technology firm Compass was listed on the NYSE last year. The economic downturn has hurt the stock, with the price dipping to an all-time low in June. However, the company is continuously working towards reaching break-even and tapping long-term growth opportunities.

New York-based real estate technology firm Compass, Inc. (NYSE: COMP) offers a cloud-based software platform to real estate brokers. The platform helps brokers in client servicing, marketing, and managing customer relationship.

Compass has over 25,000 agents who operate in more than 22 local markets. These markets include Boston, Philadelphia, New York, Los Angeles, Atlanta, Denver, Nashville, Houston, Texas, Connecticut, San Diego, San Francisco, Chicago, Westchester, Washington D.C., Santa Barbara & Montecito, and South Florida, among others.

The company was listed on the New York Stock Exchange on April 1, 2021, at a per-share price of $20.15. Following its IPO, COMP stock started declining and reached an all-time low of $3.32 on June 30.

Compass Announces Strategic Plans

Hit by volatile markets and rising inflation, Compass recently announced plans to lay off 10% of its staff, or around 450 people. It expects to record a pre-tax charge of $15 million to $16 million related to the layoffs.

Commenting on the development, a company spokesperson said, “Due to the clear signals of slowing economic growth we’ve taken a number of measures to safeguard our business and reduce costs.”

Meanwhile, the company has also shuttered Modus Technologies, the Seattle-based real estate tech firm it bought in October 2020.

“The shutdown of Modus is not a reflection of any plans to depart from the company’s commitment to title & escrow. The company continues to plan to offer these services in every market in which it operates,” Compass said in an SEC filing.

The filing also highlights Compass’ transformation plans. “The Transformation Plan is expected to include, but not be limited to, a series of actions such as a reduction in U.S. hiring and backfills resulting from attrition occurring both in the first half of 2022 and anticipated for the remainder of the year,” the filing read.

For the rest of 2022, the company does not plan to carry out any merger and acquisition activity or expand its market presence.

Compass Is All Set to Release Q2 Results

Compass is slated to release its second-quarter results next month. The Street anticipates the company to post a loss of $0.17 per share, wider than the loss of $0.02 per share reported last year.

The company expects its revenues to range from $2 billion to $2.2 billion in the second quarter, and adjusted EBITDA to lie between zero and $40 million.

In the first quarter, the tech-enabled real estate company reported a loss of $0.45 per share, narrower than the year-ago loss of $1.67 per share. Meanwhile, revenues grew 25.4% year-over-year to $1.4 billion.

Wall Street’s Take on Compass

Last month, Berenberg Bank analyst Justin Ages reiterated a Buy rating on the stock with a price target of $8 (75.8% upside potential). The analyst believes Compass’ gross transaction value will outperform the market.

On TipRanks, the stock has a Moderate Buy consensus rating based on six Buys and three Holds. Compass’ average price target of $7.75 implies 70.3% upside potential from current levels.

Compass Expects to Break Even Soon

Compass has disrupted the U.S. real estate brokerage industry with its proprietary mobile app. The company anticipates adjusted EBITDA to break even in 2022 and total at least $1.2 billion in 2025. Further, given the current economic scenario, Compass stock is expected to rise but at a slow pace.

Keeping these points in mind, and the fact that COMP stock has lost more than 50% year-to-date and over 32% over the past three months, the current price point seems to be a good investment opportunity.

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