Compass has analysts bullish ahead of the real estate brokerage firm’s third quarter results on increasing share gains in the weaker housing market.
Oppenheimer analysts upped their price target on Compass to $8 from $6 and awarded it an ‘Outperform’ rating.
Shares of Compass traded 1.5% higher at $6.29 late morning on Tuesday.
“Despite US July/August existing homes slightly weaker than our estimate (3.9 million average versus 4 million), our Q3 estimates are unchanged, suggesting 31 basis points of organic share gains (excluding acquisitions) versus prior 20 basis points,” the analysts wrote.
“We are also increasing Q4 transactions 8%, implying 21 basis points or organic share gains versus prior negative 14 basis points.”
Analysts noted increased buyer activity in the past two weeks and the improved likelihood of further interest rate cuts from the Fed, leading them to see upside to their fiscal 2025 revenue estimate of 15% growth.
“Increased buyer activity takes 60 to 90 days to affect transactions, setting up 1H25 for accelerating growth above our 15% estimate,” they wrote.
Further, Compass’ average transaction is above $1 million, with this cohort of cash-rich buyers performing better than the overall market.
“We note the three-month average growth for transactions greater than $750K 10% versus negative 7% for less than $750K,” analysts wrote. “However, more expensive homes had easier comps in 1H24.”
Wall Street analysts on average expect Compass to report an 11.5% year-over-year increase in revenue to $1.49 billion for Q3.
Loss per share is seen narrowing to $0.03 from a loss per share of $0.08.
Compass is estimated to report earnings in the week starting Monday, November 4, based on prior years’ report dates.