Compass delivered an optimistic forecast to investors, lifting both its fourth-quarter and full-year outlooks, sending its stock soaring by over 20 percent. This uptick reversed the company’s month-long downward trajectory, providing a much-needed boost.
In addition to the positive financial update, Compass confirmed the completion of its $444 million acquisition of @properties and Christie’s International Real Estate earlier, signaling a strategic move to expand its footprint in the industry.
The company revised its full-year revenue projections upward, now expecting between $5.61 billion and $5.64 billion, compared to earlier estimates of $5.47 billion to $5.57 billion. Its adjusted EBITDA forecast also rose, now projected to range between $124 million and $127 million, an increase from previous estimates of $109 million to $119 million. Notably, Compass also expects to keep operating expenses below its lower-end forecast of $876 million.
CFO Kalani Reelitz highlighted that these adjustments suggest Compass is on track to generate positive free cash flow in the traditionally weak fourth quarter, a milestone that marks a significant improvement for the company.
The company also saw impressive growth in its workforce, adding over 650 principal agents in the fourth quarter, representing a 50 percent increase compared to the same period last year.
The announcement came just hours before Compass CEO Robert Reffkin addressed an investor conference. Reffkin pointed to the company’s competitive advantage, citing its customer base, which is less sensitive to interest rate fluctuations. Many of Compass’ clients don’t rely on mortgages and instead generate income from interest, allowing them to remain relatively unaffected by rising rates. This positioning, Reffkin argued, sets Compass apart from its competitors.
In addition, Compass’ market share in high-value homes has helped fuel its growth. The average home price transacted by Compass in the third quarter exceeded $1 million, a segment that saw a 5 percent increase in sales during the first half of the year, according to data from The Agency. This comes despite a broader market decline, with overall home sales dropping by 13 percent during the same period.
After a strong surge earlier, Compass’ stock had faced some turbulence. It reached a year-high of $7.09 in late November, following the announcement of its acquisition deal. However, the stock subsequently fell more than 17 percent by the end of 2024.
Reffkin also provided an update on Compass’ market share ambitions, revealing that the company has made notable progress toward its target of 30 percent share in its top 30 cities, currently hovering around the 20 percent mark. This growth is part of a broader strategy to capture as many listings as possible, a critical driver of transactions in real estate.
“The person that has the inventory is the source of all of the transactions,” Reffkin explained. “And listings beget more listings.” Compass is funneling its listings into a unique three-phase marketing strategy that culminates in a listing on the Multiple Listing Service (MLS). However, this approach faces challenges, particularly due to the National Association of Realtors’ Clear Cooperation Policy, which mandates that listings be added to the MLS within one day of being marketed publicly.
Reffkin suggested that this policy may soon be upended following a recent Supreme Court ruling allowing the Department of Justice to continue its investigation into the National Association of Realtors. He expressed concern that if the policy is repealed, small brokerages could struggle to compete with larger firms.
“Without CCP, agents at small brokerages will likely be more inclined to consider the value proposition offered by large brokerages,” Reffkin said, acknowledging a potential shift in market dynamics.
Compass’ proactive approach and strategic acquisitions have positioned it as a resilient player in an ever-changing real estate landscape, but it remains to be seen how industry regulations will evolve and impact its competitive positioning.
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