A Rapidly Growing Real Estate Technology Company Disintermediating an Entire Industry By Luke Lango and the InvestorPlace Research Staff What do all of today’s Big Tech giants have in common? They disintermediated multi-hundred-billion-dollar economic systems that needed to be disintermediated, with disruptive technologies that radically improved the efficiency of those systems. Amazon disintermediated retail, by making shopping as easy as clicking a button on your phone. Google disintermediated newspapers, by giving folks access to all the information in the world through a simple search bar. Netflix disintermediated movie theaters, by allowing people to watch multiple blockbuster movies from the comfort of their own home and for just $15 a month. Successful disintermediation via disruptive technology is a blueprint for creating trillion-dollar tech empires. We believe we’ve found another startup set to follow this blueprint to 10X gains. The story here is pretty simple… The housing market is gigantic, and it’s not going anywhere anytime soon. People will forever need a place to live, and they’ll forever pay a premium for that place to live. The home selling process today, however, is awful. It’s high complex. It’s paper-driven. And it’s full of antiquated workflows. We think it’s safe to call this the single worst retail process in the world. The industry has been stuck in the stone age for decades. But we believe that will all change soon as digital technologies disrupt this industry and flip it on its head. In today’s edition of The Daily 10X, we’re going to tell you about a company we are confident will emerge as a big winner in this industry overhaul. This company has been stealing market share at a blistering pace in the last couple of years and remains in the early innings of its growth story. If this star-studded management team continues to execute, as we believe they will, this stock will be one of the market’s biggest winners for years to come. Company Overview The company we’re talking about is Compass (COMP). Compass is a real estate technology company that is quickly becoming a de facto leader in the industry by providing a comprehensive, end-to-end suite of solutions to real estate agents. The company is essentially working to replace antiquated real estate workflows with a seamless, all-digital platform that empowers real estate agents to deliver an exceptional experience to every seller and buyer. The value add here is tremendous, because today’s real estate agent uses about nine different software programs, on average, to do their job. Compass works to compress those nine different programs into one platform. Doing so is not easy, because agent workflows are incredibly complex. On the sell-side, you have to prepare the listing, analyze comps, set up renovations, conduct staging, create marketing, open escrow, order title, select a lawyer, and much, much more. And it’s the same story on the buy-side… In the last few years, Compass’ product and engineering teams – consisting of more than 1,000 people – has built the Compass platform to streamline all of this work for agents and allow them to focus on the work that actually moves the needle for clients. Agents have voiced their gratitude by using the platform en masse. Compass today controls about 6.2% of the national real estate market, nearly double from the 3.3% it controlled just last year. Principal agent retention rate exceeds 90%. And, perhaps most importantly, agents close an average of 19% more transactions measured from this first year compared to their second at Compass. The company went public via an IPO in June. The market cap is $5.5 billion. The Opportunities - We love the market. According to the National Association of Realtors, or NAR, in 2020, more than 5.6 million homes were sold in the U.S., representing approximately $1.9 trillion in transaction value. Housing is the single largest consumer expenditure in the U.S., and homes are often a substantial source of household wealth. This industry is huge and not going anywhere, yet its ripe for digital disruption, and Compass is at the epicenter of that disruption.
- With 6.2% of the U.S. real estate market, Compass is the largest independent real estate brokerage by Gross Transaction Value. That’s impressive.
- The percentage of home buyers and sellers using agents is largely unchanged in the past decade at just under 90%. We believe Compass’s agent-first, tech-heavy model sets it up to be a big player in the real estate world of today and tomorrow.
- The core AI-powered recommendations engine is impressive. For example, high value prospects flagged as “Likely to sell” have led to a 61% higher win rate for its agents, compared to those that were not flagged as likely to sell.
- This is a founder-led team with an impressive CEO and supporting cast. Among them you have Columbia and Harvard grads and execs with leadership experience at Amazon, Microsoft, and Twitter.
- The company is already making good on its promise to extend beyond real estate agent commissions as it just launched a mortgage company through a joint venture with Guaranteed Rate. This company is called OriginPoint, and plans are to slowly roll this out with a nationwide launch in the back half of FY22. Our industry connections believe agents will flock to this solution and that it will significantly disrupt the mortgage industry.
- Momentum is ramping as management recently hiked its full-year revenue outlook to $6.15 billion to $6.35 billion. The midpoint here implies 68% growth.
The Challenges - Technology is entirely removing the need for humans in many industries. The real estate market may be the next such industry. Compass may need to refocus its agent-first model if this quickly becomes a reality.
- Growth is slowing. Based on the FY21 guide, which was recently raised, management is forecasting a slowdown in Q421 revenue growth at ~21%. The consensus among analysts is currently ~25% growth in FY22. That estimate may prove too high.
- That is a lot of real estate market exposure here, which could be a negative if the Fed starts hiking rates in 2022 and such rate hikes dilute mortgage demand.
How It Could 10X in Value - The consensus revenue estimate on Wall Street for Compass in 2023 is $10 billion.
- We think it’s likely that the company sustains a 20% compounded annual revenue growth rate there after in 2030.
- That would imply over $30 billion in revenues by 2030.
- A simple 2X sales multiple on that implies a potential future valuation of $60 billion.
Final Word Technology will undoubtedly overhaul this industry over the next decade. The durability of agents in this market, however, should also be noted. Compass clearly embraces the importance of today’s agent and is unleashing the power of tech to set its agents up for success. Our industry connections had only good things to say about what this company and its team are doing. And we agree. The stock is trading well below its IPO price of $18. If you’re looking to take a position in the future of the housing industry, this is a good place to start. Sincerely, 
Luke Lango
Editor, The Daily 10X Stock Report Small-cap stocks that can rise 10X over the long run are often volatile. If you are interested in this stock, buy it like a pro by setting strict limit prices. Learn more about how to use limit orders here. | Key Company Details | | Company Name | Compass, Inc. | | Ticker Symbol | COMP | | Yesterday's Clos | $13.62 | | Current Market Value | $5.41 Billion | | Annual Revenue | $5.48 Billion | | Catalyst | Real Estate Technology |
Today's Investor Education Focus: | | | Today's investor is swamped with information, offers, opinions, and different strategies. For someone with a family and a full time job, it can be impossible to sift through all the information out there and find great stock ideas. Fortunately, there's a group of incredible investment minds with long track records of success that will share their top stock ideas with you for free. | Click here to visit The Daily 10X Stock Report Education Center
and access our library of our educational resources
New to The Daily 10X Stock Report?
Click here to access our Quick Start Guide |
The service and personal attention we received from Mr Pedro was exceptional and beyond what we were expecting! His knowledge of the local and national market and his commitment in finding us the best rate helped us in our search for our dream home. As first time home buyers everything was new to us and the most important thing we wanted was someone we could trust. He was there for us every step of the way. I'm glad we chose his services and would recommend Mr Pedro to anyone buying a home or expanding his / her business with an affordable loan rate in return.”
ReplyDeleteContact Pedro a loan officer
Email : pedroloanss@gmail.com
WhatsApp: +1-8632310632.