Compass stock price has staged a slow recovery in the past few years, moving from a low of $1.84 in 2023 to nearly $10 today. This recovery could continue as the company gains market share and mortgage rates trend lower.
Why Compass stock price is rising
Compass is one of the biggest players in the real estate industry. It is on a path to become the biggest company in the residential real estate industry if its proposal to acquire Anywhere Real Estate in a $1.6 billion goes through.
The company’s business is doing well, a trend that may continue as mortgage rates in the US drop. Data compiled by FRED shows that the average mortgage rate has dropped to 6.24% from the 12-month high of 7%. The rate will likely keep falling as the Federal Reserve continues cutting interest rates.
Compass and other companies in the real estate do well when interest rates are falling because it makes the cost of borrowing less expensive.
The most recent results showed that the company’s business continued doing well, a trend that management and analysts expect will continue. The revenue jumped by 24% to $1.8 billion, while its adjusted EBITDA jumped to $93 million. It generated a free cash flow rate of $73 million, continuing a trend that has been going on for years.
Compass’s revenue continued doing well as the Gross Transaction Value (GTV) jumped to $70.7 billion from $57 billion in the same period last year. It has continued adding principal agents to its platform and now has 17,752, while the number of transactions rose by 22% to 67,886.
Analysts are optimistic about Compass growth
Meanwhile, the management believes that the trend will continue. The average estimate is that the company’s growth will continue. The average estimate is that its revenue will jump by 19.60% in the fourth quarter to $1.65 billion. This estimate is inside the management’s guidance of between $1.59 billion and $1.69 billion.
If the analysts’ views are correct, it means that the company’s annual revenue will be $6.9 billion, up by 22% from last year. Excluding Realogy’s business, the estimate is that its revenue will be $7.8 billion next year. Also, its earnings per share (EPS) is expected to move to $0.46 this year and $0.54 next year.
This optimism explains why analysts believe that the Compass stock price has some more upside, with the average estimate among analysts being $10, a few points above the current $9.4
Still, the main risk for the Compass stock price is that insiders are selling the stock. No insider has bought the stock in the last 12 months. Instead, these investors have sold shares worth over $198 million. These insiders include the CEO and the general counsel.
COMP stock price technical analysis
Compass stock chart | Source: TradingView
The weekly chart shows that the Compass stock price formed a double-bottom pattern at $1.84, its lowest level in 2022 and 2023. This pattern formed its bottom, which explains why it has been in a strong uptrend.
Compass share price has now moved to the 38.2% Fibonacci Retracement level. It has also moved above the 50-week and 100-week Exponential Moving Averages (EMA), a sign that bulls are in control.
COMP stock is now hovering at an important resistance level, which is slightly below the important resistance level at $9.8, a level where it has failed to move above in the past few months.
A move above that level will point to more gains, potentially to the 50% Fibonacci Retracement level at $12, which is about 28% above the current level m
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