Rising Housing Market Uncertainty Pushes Morgan Stanley to Cut Compass to Equal Weight
2022.07.21 18:10
Rising Housing Market Uncertainty Pushes Morgan Stanley to Cut Compass to Equal Weight
By Senad Karaahmetovic
A Morgan Stanley analyst slashed the rating on Compass (NYSE:COMP) to Equal Weight from Overweight.
The analyst also cut the price target to $5 per share from $7 to reflect “growing housing market uncertainty.” Morgan Stanley previously said it expects to see a drop in home sales by 12%/3% in 2022 and 2023, respectively.
“The steep increase in mortgage rates and the accompanying decrease in affordability – the fastest 6-month and 12-month deterioration on record – has widened the range of potential outcomes for the housing market in 2H’22 and 2023,” he added.
This uncertainty has also forced the analyst to cut the price target on Zillow Group (NASDAQ:Z) to $42 from $54, after slashing 2022/2023 revenue estimates by 1% and 12%, respectively.
“Z’s Premier Agent revenue is highly correlated with existing home sale transaction value growth (>0.90 r-squared on a rolling 2-yr basis); therefore, fundamentals over the near to medium term will be primarily driven by trends in the overall housing market. Macro uncertainty and the lack of idiosyncratic catalysts leaves us on the sidelines for now, but we acknowledge that the risk-reward is becoming more compelling,” he added.
COMP stock price is down 2% in premarket trading while Zillow shares are trading 0.6% in the red.
