There are also questions about how a forthcoming vaccine for the coronavirus would affect the real estate and mortgage markets. “Rocket continues to win in the marketplace with a combination of technology & customer service, benefiting from industry leading retention rates (now ~4.5x industry averages),” Chiodo wrote in a note. Timothy Chiodo, an analyst at Credit Suisse, raised concerns about increased competition and rising interest rates in the future but also expressed confidence in Rocket’s fundamentals. refi market share to some degree using industry sources, we note that when asked on yesterday’s conference call management wouldn’t disclose refinance/purchase mix of origination, which we found surprising given that even mortgage insurance companies break out their NIW mix between purchase and refinance volume.” He continued: “And while we are able to ascertain purchase vs. “On a Q/Q basis, things look better – Partner increased as a percentage of mix from 30% in 2Q to 36% in 3Q, and we will be looking at this figure to see if the company can make inroads in purchase market share, which we believe to be in the low single digits today.” “Given that the Partner channel skews higher towards purchase and DTC more towards refi, this suggests to us that purchase mix share-take is occurring at a slower clip than market share gains in refinance volumes,” Micenko wrote. Micenko noted that Rocket’s direct-to-consumer channel comprised 64% of funded loan volume at 74% of adjusted revenue in this quarter, compared to 36% of volume and 26% of adjusted revenue from the partner channel, which skews toward purchase. That was telling, according to Jack Micenko, an analyst at Susquehanna Partners, who gave Rocket a “Neutral” rating with a fair value price target of $20 a share. Rocket declined to tell analysts how much of its loan volume during the third quarter was purchase and how much was refinancing. “The qtr does little to resolve key debates (especially as conditions may shift), and its buyback authorization is likely a less preferred path for capital return,” Morgan Stanley analyst James Faucette wrote in a research note. While Rocket showed it could deliver in a low-rate environment and flex its considerable tech muscles, investors still have questions about how it can achieve its goal of 25% market share by 2030 when market conditions change, analysts said. The consensus price target average from 14 analysts was $26.12, according to data compiled by MarketBeat. So what explains the lukewarm response from investors?īy and large, analysts who cover the mortgage lender believe that Rocket is underpriced. We’re super excited about what we’re doing over here.” “That frankly makes no sense to me,” Cramer said.įarner replied: “You’ve got me puzzled too on what’s going on with the stock. EST, it’s been trading around $21.76.įarner appeared on Jim Cramer’s “Mad Money” show on Wednesday evening, where the two discussed the confounding situation. Add that to a low-rate environment that is expected to continue well in 2021, and the forecasts should be quite favorable, right?ĭespite all that, Rocket’s stock at the close of business Wednesday was trading at a ho-hum $21.60, slightly above the $21.50 price it closed at on its Aug. Rocket announced that it would be buying up to $1 billion in common stock over the next two years, which should raise the price. And though gain-on-sale margins fell from 5.19% to 4.52%, they were still well above expectations. It also inked several partnerships that could boost its purchase business, something analysts and investors have said they want to see in order to justify long-term forecasts. The highlights from the third quarter alone were impressive by any standard: Rocket claimed big gains in Millennial adoption of its tech platform. In fact, through the first three quarters of the year, Rocket has made a stunning $6.55 billion in profits. It thumped competitors with a record $89 billion in originations in the third quarter, and made $3 billion in profits. You can understand Jay Farner’s frustration: Rocket Companies just had the most productive quarter in the history of residential mortgage lending.
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