On Tuesday, Oppenheimer has raised its price target on Compass Inc. (NYSE:COMP) shares to $9.50, up from the previous $8.50. The firm has also maintained its Outperform rating for the real estate technology company.
The stock, currently trading at $7.14, has shown remarkable momentum with a 193.83% return over the past year according to InvestingPro data. The adjustment comes in the wake of Compass's strategic acquisition of Christie's International Real Estate, Midwest and Atlanta brokerages, as well as a Title company, in a deal valued at $444 million. This sum includes $150 million in cash and $294 million in stock.
The acquisition is notable for bringing in international referrals through Christie's network of over 100 affiliates, as well as adding an affiliate strategy that does not dilute Compass's own brokerage services.
It also incorporates an established mortgage business with the same joint venture partner and expands title services in attorney-directed states, which are traditionally more challenging markets to penetrate. With a market capitalization of $3.64 billion and annual revenue of $5.35 billion, Compass has established itself as a significant player in the real estate technology sector.
Compass's newly acquired brokerages, @properties and Ansley, are expected to complement the company's existing operations in Chicago, Indiana, Wisconsin, and Atlanta. The financial guidance provided suggests a consolidated EBITDA margin of 9%-10% in the first year post-acquisition, with title and affiliate services contributing approximately 30% and 30-35% respectively.
Furthermore, Oppenheimer anticipates that Compass will achieve $30 million in cost synergies over time, although this projection does not take into account any potential revenue synergies. The revised $9.50 price target is based on a 14 times multiple of the company's forecasted FY26 EBITDA, which aligns with the multiples of peer companies.
For deeper insights into Compass's valuation metrics and growth potential, InvestingPro subscribers can access comprehensive analysis, including 12 additional ProTips and a detailed Pro Research Report that covers key financial indicators and expert analysis. This valuation also reflects Compass's rapid growth trajectory, which is expected to outpace its peers by 350%.
In other recent news, Compass Inc. reported robust growth in its third-quarter earnings, with a significant year-over-year revenue increase and a rise in transactions. The company's adjusted EBITDA soared to $52 million, marking a 139% increase from the same quarter in the previous year.
Recent transactions outpaced Oppenheimer's own and Wall Street's forecasts by 7% and 5%, respectively. This was attributed to market share gains and the strong performance of higher-priced real estate assets. Despite rising mortgage rates, Compass Inc. is showing signs of strong operating leverage.
Looking ahead, Compass Inc. is expected to benefit from product tailwinds in fiscal year 2025. Oppenheimer has adjusted its growth forecasts for the company, now expecting a 7% increase in fiscal year 2025 and a 15% rise in fiscal year 2026 for existing home sales. These recent developments underscore the ongoing momentum and growth trajectory of Compass Inc. in the real estate technology sector.
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