2. Compass, Inc. (NYSE:COMP)
Number of Hedge Fund Holders: 29
Compass, Inc. (NYSE:COMP) is a real estate technology company that employs real estate agents and provides them with an end-to-end platform to deliver exceptional client management. The success of Compass, Inc. (NYSE:COMP) is directly tied to the success of its agents. The company generates most of its revenue from the commissions paid by real estate agents every time a property is transacted through its platform.
The platform provided by the company is not only backed by proprietary data and analytics, but uses machine learning and AI to simplify the workflow for agents. Agents can use the integrated cloud-based suite to manage customer relationships, client service, marketing, brokerage service, and other functionalities all using the tailor-built platform for the real estate sector.
The platform continues to attract real estate agents and increased its principal agent count by 7.3% year over year in the first quarter, despite the headwinds from rising interest rates and declining real estate transactions in the market. Compass, Inc. (NYSE:COMP) is an investors’ favourite as it was held by 29 hedge funds in Q1 2024 with stakes worth over $188 million.
In Q1 2024, Compass, Inc. (NYSE:COMP) grew its revenue by 10% year-on-year to $1.05 billion. The increase in revenue was mainly on the back of increasing real-estate transactions during the quarter. The company processed 38,449 transactions during Q1, up 7.1% year over year. The company has also raised its next quarter revenue guidance and said it expects revenue to grow to between $1.6 billion to $1.7 billion, while analysts’ expectations sit at $1.5 billion. This rise in expectation stems from its agents outperforming the market in terms of closing deals. Moreover, management has remained focused on reducing costs through incorporating technology and reduced its operating expenses by $32 million year-over-year during the first quarter and brought them down to $211 million.
Is COMP too risky to invest in? Here’s the conclusion:
Compass, Inc. (NYSE:COMP) might be a risky investment due to the current real estate slowdown and the lack of supply of affordable houses in the US. However, the company has grown its annual transactions by 7.1% year-over-year in Q1, while the overall market saw a 3.5% decline. Moreover, the company has grown its market share as well. In Q1 the company grew its quarterly market share by 26 base points year-over-year. The company is also expanding its presence into new regions. On April 3, Compass, Inc. announced its expansion to New Orleans and the Louisiana and Mississippi market by strategically acquiring Latter & Blum, a renowned real estate advisor in the South. This strategic acquisition will not only enable the company to expand its market share further but has the potential to bring more revenue as now Latter & Blum’s agents would have access to Compass, Inc’s platform.
Stated that the company’s agents have been successfully closing real-estate transactions despite the slowdown in the market, the year over year increase of 33% in the company’s inventory presents an attractive front for future growth. Moreover, Compass, Inc. is leveraging AI in its platform by providing its agents with smart real-estate valuation analysis, AI-driven content for property listings and marketing, and much more. Its AI-Driven Client Prospecting Recommendations System automatically recommends relevant clients in an agent’s contact database, thereby increasing the chances of a successful transaction. Over the past 3 months, 3 Wall Street analysts have given a Buy rating on the stock and the average price target of $9.09 represents an upside of 185% from current levels.
