Compass Stock (COMP) Surges 15% as Zillow (Z) Lawsuit Sparks Market Frenzy

Real estate tech stocks just got a shot of adrenaline—and it’s not from overpriced coffee.

Compass (COMP) shares rocketed double-digits today after Zillow (Z) dropped a legal bombshell. The lawsuit’s details? Murky. The market’s reaction? Predictably hyperbolic.

Why Traders Are Bidding Up COMP

Speculation’s running wild that Compass could gain market share if Zillow stumbles. Never mind that both companies still lose money hand over fist in the race to digitize home sales.

The Cynical Take

Wall Street’s playing its favorite game: ‘Buy the rumor, sell the lawsuit.’ Meanwhile, retail investors will likely be left holding the bag—again.

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Compass’ lawsuit claims that this ban is anticompetitive, and that private, or pocket, listings protect sellers’ privacy. Zillow doesn’t agree. It points to lower sales from pocket listings as a negative for sellers, while also stating it’s unfair to restrict buyers from being able to see homes for sale.

Of course, there’s more to this story than consumer privacy or rights. At the end of the day, the biggest concern of these two companies is money. Compass wants to generate sales through private listings while still offering other listings on Zillow, and Zillow wants to maintain its dominance of the real estate listing space with access to all listings.

How Will the Compass and Zillow Lawsuit Play Out?

Compass’ lawsuit seeks to end the Zillow ban against its pocket listings. It’s also seeking a trial by jury and damages from Zillow. However, Zillow has countered, saying that the claims made by Compass are unfounded.

This lawsuit comes at a time when the real estate market is struggling. The market isn’t performing well due to high mortgage rates and inflated home prices. This has resulted in a market that is approaching levels last seen during the 2009 housing crisis.

COMP Stock Movement Today

COMP stock was up 1.6% on Tuesday morning, following a 2.12% rally yesterday. The shares have also increased 6.84% year-to-date and 76.55% over the past 12 months.

COMP vs. Z: Which Is the Better Stock?

Turning to the TipRanks comparison tool, traders will see which stock analysts prefer. Compass and Zillow both have consensus Moderate Buy ratings. Even so, COMP offers the better upside potential at 54.72%, compared to Z’s 18.98%.