Rocket Mortgage's
A note published by Bose George, analyst at Keefe, Bruyette & Woods, Wednesday downgraded Rocket's stock "on valuation and on the company's relative weakness in the
George set the stock-price target at $10.75, down from his previous level of $14.48.
The thorn in Rocket's side is that refinance volume will be low this year, the note said. That creates a "relative disadvantage" for Rocket, which historically had a much larger share of the refi market versus purchase. Rocket's purchase market share has bounced between 3.5% to 4% since 2021, George estimates.
"This reliance on the refinance market made [Rocket] the No. 1 originator during the refinance boom in 2021, but the company's market share has fallen meaningfully since then as refinance activity has plummeted and peers with greater exposure to the purchase market have grown market share. While the company has a number of initiatives to grow its purchase share, we do not expect them to have any meaningful impact over the next few years," the note said.
Some of the measures taken by the Michigan-based mortgage lender to ramp up purchase business has been the rollout of
George believes that "much of the company's purchase volume is likely coming from its partner network, which includes its broker channel." But wholesale "remains a competitive channel, since United Wholesale Mortgage has roughly 50% of industry broker volume and can move pricing around," the note said.
From Dec. 14 to Dec. 27, Rocket's stock price grew by over 45% to $15.04, according to Morningstar. The increase was buoyed by the announcement the
Rocket's stock closed 5% lower on Thursday at $12.67 per share, the day after the KBW note came out, but in early trading Friday morning, it was up to $12.88.
