Compass saw its stock soar more than 20% on Wednesday after the company raised its fourth-quarter and full-year revenue outlooks. This boost reversed a month-long decline in the stock price.
Earlier this week, Compass also completed a $444 million deal for @properties and Christie’s International Real Estate, further fueling investor confidence.
Raised Revenue and EBITDA Projections
The company revised its full-year revenue projections upward, increasing the low-end estimate from $5.47 billion to $5.61 billion, and the high-end estimate from $5.57 billion to $5.64 billion. Adjusted EBITDA projections for the year were raised to between $124 million and $127 million, compared to the previous range of $109 million to $119 million.
Additionally, Compass anticipates operating expenses to remain below the low-end full-year projection of $876 million.
Positive Free Cash Flow Expected
With the updated projections, Compass expects to generate positive free cash flow in the fourth quarter, a period that has traditionally been challenging for the company, according to CFO Kalani Reelitz.
In a further sign of growth, Compass added over 650 principal agents in the fourth quarter, marking a 50% increase from the same period last year.
CEO Reffkin’s Confidence
The announcement came just hours before CEO Robert Reffkin spoke at an investor conference. Reffkin also highlighted the firm’s less rate-sensitive clientele, noting that many Compass customers do not rely on mortgages and instead benefit from interest income. This positions Compass advantageously in the current interest rate environment.
“We’re not payers of interest,” Reffkin said, pointing to this as a key factor in the company’s outperformance compared to competitors.
Market Activity and Growth
The average home price sold by Compass in the third quarter exceeded $1 million, a segment that saw a 5% growth in sales in the first half of the year, according to The Agency. In contrast, overall home sales dropped by 13% during the same period.
Despite a 17% drop in stock value at the end of 2024, Compass’ stock has recovered, currently standing at $6.80 at the time of publication. The company’s stock had previously reached a year-high of $7.09 following its announcement of the @properties and Christie’s deal.
Market Share and Listings Strategy
Reffkin also shared progress on Compass’ goal to achieve 30% market share in its top 30 cities, noting that the company is currently in the 20% range. This strategy is part of Compass’ broader plan to acquire as many listings as possible, which Reffkin believes are crucial to driving transactions.
“The person that has the inventory is the source of all of the transactions,” Reffkin said. “And listings beget more listings.”
MLS and Marketing Strategy
Compass aims to funnel its listings into a “three-phased marketing strategy,” where the MLS listing is only part of the final phase. This approach presents a challenge due to the National Association of Realtors’ Clear Cooperation Policy (CCP), which requires listings to appear on the MLS within a day of public marketing.
Reffkin speculated that the CCP could be scrapped as soon as next month, following a Supreme Court ruling allowing the Department of Justice to continue investigating the trade group.
He also voiced concerns that, without the CCP, small brokerages might struggle to compete with larger firms. “Agents at small brokerages, I believe, will be more interested in the value proposition of a large brokerage,” he said.
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