UBS raises Compass stock rating to buy, hikes target to $11

On Tuesday, UBS analyst Chris Kuntarich upgraded Compass Inc. (NYSE: COMP) stock rating from Neutral to Buy and increased the price target to $11.00, up from the previous $7.00. The upgrade reflects a positive outlook on the company’s recent acquisition and its potential for organic growth and market share gains. Currently trading at $7.38, Compass has demonstrated strong momentum with a 93% return over the past year. According to InvestingPro data, the stock is trading near its 52-week high of $7.69, suggesting robust market confidence.

Kuntarich’s analysis suggests that the current stock price does not fully account for the advantages of Compass’s acquisition of Christie’s, nor its capacity to achieve organic market share increases. UBS projects a 14% three-year revenue compound annual growth rate (CAGR) and a 60% adjusted EBITDA CAGR through the fiscal year 2027, which is 20% above the consensus for FY26. With a market capitalization of $4.09 billion and a projected 15% revenue growth for FY2024, InvestingPro analysis reveals 14 additional key insights about Compass’s growth potential and market position.

The report highlighted that while the anticipated earnings per share (EPS) call set for February 18, 2025, is expected to clarify estimates, there are additional factors that could provide further momentum for the stock. These include a favorable outcome from the Clear Cooperation Policy decision, a boost in home purchase activities in Los Angeles following the recent wildfires, which could impact around 3% of Gross Transaction (JO:TCPJ) Value (GTV), and potential cost savings of $30 million related to the acquisition over the next three years.

Moreover, UBS anticipates that Existing Home Sales trends may pick up in the second half of 2025 and into FY26, providing additional upside for Compass. The report concludes with an emphasis on Compass’s proven ability to manage organic growth and cost containment, which Kuntarich believes is still not fully recognized by the market.

In other recent news, Compass Inc. has been experiencing significant developments. The company’s revenue and adjusted EBITDA have surpassed guidance midpoint by 8% and 230% respectively, according to a recent update by Needham analysts. These positive results are attributed to an increase in agent numbers, improved market conditions, and consistent operational expense discipline.

The real estate technology firm also revised its financial outlook for Q4 and the full year of 2024, projecting record adjusted EBITDA and free cash flow despite a 29-year low in resale transactions. The updated guidance suggests Q4 revenue between $1.36 billion and $1.39 billion, up from the previously forecasted range.

Furthermore, Compass has undergone strategic acquisitions, including Christie’s International Real Estate, Midwest and Atlanta brokerages, and a Title company. The deal, valued at $444 million, is expected to bring in international referrals and expand title services in attorney-directed states.

Oppenheimer, a prominent investment firm, has raised its price target on Compass shares to $9.50, maintaining its Outperform rating. Needham analysts also maintained a Buy rating for Compass, reflecting confidence in the company’s growth trajectory and strategic direction. These developments are recent and may significantly influence the company’s future performance.

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