Compass Group Share Price Dips Despite RBC Upgrade (LON: CPG)

Compass Group share price (LON:CPG) is trading lower today, despite receiving an upgrade from RBC Capital Markets. The shares are trading down 1.05% at 2,347 pence, a move that underscores the complex interplay between positive analyst sentiment and cautious market expectations.

The day's price action occurred despite RBC Capital analyst Karl Green upgrading Compass Group to “Outperform” from “Sector Perform.” Green also raised the price target to 2,775 pence from 2,700 pence, citing the recent pullback as a favorable entry point for a “high-quality compounder.” 

According to the analyst, Compass Group has substantial growth potential, given its market share is less than 15% of its total addressable market. However, the markets did not react in lockstep with the positive assessment.

The RBC upgrade follows similar positive ratings from other financial institutions. Goldman Sachs upgraded Compass Group to “Buy” on November 11, raising its 12-month price target to 3,000 pence. Goldman Sachs pointed to the stock's approximate 10% de-rating over the year, positioning it at a discount relative to its returns profile and forward organic growth. Their analysis projects a compound annual growth rate (CAGR) of around 9% for EBITA from fiscal years 2025 to 2029. Citigroup also upgraded Compass Group to a “Buy” rating on November 28, increasing its price target from 2,750 pence to 3,000 pence.

Despite the chorus of positive analyst sentiment, Compass Group's recent financial guidance may have tempered markets' enthusiasm. The company reported an 8.7% organic revenue growth for the fiscal year ending September 2025. However, it projected a moderation in revenue growth to around 7% for fiscal year 2026.

This slowdown is attributed to easing inflation and the partial pass-through of lower costs to clients. While this guidance is in line with market expectations, it represents a deceleration compared to the previous year's performance. Compass Group's stock is currently down 12.77% since the start of the year, with bulls eyeing a shift in momentum.