Compass stock roars back to August levels on cost-cutting progress

LifestyleVisuals/iStock via Getty Images

Compass (NYSE:COMP) stock spiked as much as 70% to the highest level since mid-August as investors praised the tech-focused real estate brokerage's signal that it may cut costs more than previously expected.

The company, though, issued Q4 guidance earlier this week that called for a 23% quarterly slump in revenue against a backdrop of a housing market cooldown driven by two-decade high mortgage rates that have prospective buyers sidelined.

During Q3, Compass (COMP) made progress in reducing its cost base "with a very specific goal to become free cash flow positive for 2023, starting with being free cash flow positive in the second quarter of 2023," CEO Robert Reffkin said during his company's Q3 earnings call.

Needham analyst Bernie McTernan, meanwhile, reiterated his Buy rating on Compass (COMP) stock as the company indicated that it may cut expenses more than its prior target. "The real upside is this financial discipline lasting through the upturn in the cycle, similar to ABNB through the pandemic, and realizing significant margin expansion when the market returns," he wrote in a note.

The huge upswing also comes as most COMP peers have seen their stocks shoot higher, though not nearly to the same magnitude as COMP.

Anywhere Real Estate (HOUS) +5.7%, Redfin (RDFN) +14.4%, Re/Max Holdings (RMAX) +4.4%, Offerpad Solutions (OPAD) +8.9% and Opendoor Technologies (OPEN) +8.4% were some of the biggest winners in the group during the session.

Seeking Alpha contributor Gary Bourgeault justified Compass stock with a Neutral rating in assessing whether it's reached a bottom.