Compass (COMP) is one of the biggest players in the real estate agency industry in the United States. It operates a technology platform that connects house buyers and sellers.Â
It also has thousands of agents who leverage its technology to track their business, do valuation modeling, interact with their customers, do virtual tours, and other activities. As such, it is at the intersection of the traditional agency model and technology.
The company has also expanded its business over time. For example, it offers title and escrow services for its customers. It also has a joint venture with Guaranteed Rate, a large retail mortgage company. It also launched Compass Concierge, which it provides homeowners with third party service providers.
Compass business has gone through a rough patch in the past few years because of the elevated interest rates, which slowed the pace of home services. Most importantly, it suffered from a court ruling that changed how people buy real estate in the US.Â
Compass stock has rebounded by 270% from its lowest level in 2023 as hopes of more Federal Reserve interest rate cuts rose. It was trading at $6.65 as the HypeIndex metric surged to 270%.
Positive hype
Compass hype jumped as its stock soared to the highest level since April 2022. It has jumped by over 270% from last year’s low.Â
The stock jumped after the Federal Reserve started cutting interest rates as inflation moved near its 2% target. The real estate industry does well when the Fed is cutting interest rates.Â
Compass also published strong financial results that revealed that its revenue rose by 12% in the third quarter to $1.4 billion. This happened as the number of agents on its platform soared by 20% to 17,542.Â
The company also boosted its forward guidance, with its revenue expected to come in between $1.225 billion and $1.32 billion. Its EBITDA is expected to come in between $0 and $10 million. For the year, Compass’ revenue will be between $5.47 billion and $5.57 billion.
The management hopes that its cost-cutting measures will help it become a more profitable company in the long term.Â
Analysts have a largely bullish outlook for the Compass stock as it continues to gain market share in the industry. Their average stock estimate is $6.8, a few points above the current level.
Compass stock has remained above all moving averages, meaning that bulls are in control for now.
Negative hype
Compass operates in a highly competitive industry. Some of the top competitors are companies like Redfin, Keller Williams, RE/MAX, Zillow, and EXP Realty.
A court ruling earlier this year could affect its profitability growth in the long term.Â
Compass is not yet profitable, a trend that may continue for another two financial years. Its net loss in 2023 was over $197 million.
Compass has continued to dilute its shareholders by rising the number of outstanding shares to 491 million from 374 million in 2021. Some of this dilution happened because of its stock-based compensation.Â
Summary of Compass stock
Compass stock has done well in the past few months, rising from a low of $1.8 in October last year to almost $7. It formed a golden cross pattern as the 50-day and 200-day moving averages crossed each other.Â
It is attempting to move above the key resistance point at $6.77, a move that will invalidate the double-top pattern and point to more gains. Therefore, if this happens, the stock will jump to the next point to watch being at $8, which is about 20% above the current level.
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HypeIndex is an AI platform that detects Hype in stocks and cryptos before it moves the market, providing reliable early detection for profitable investment opportunities.
The algorithm for our proprietary HypeIndex score is based on sentiment analysis, data science and machine learning.
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