Rocket Companies Inc RKT reported solid second-quarter results Wednesday and guided to strong volumes in the third quarter.
The Rocket Companies Analysts: Timothy Chiodo of BofA Securities maintained a Buy rating on Rocket Companies with a $32 price target.
Credit Suisse’s Jason Kupferberg maintained a Neutral rating and $29 price target.
Why BofA's Bullish On Rocket: The Detroit-based mortgage company guided to a gain-on-sale margin between 4.05% and 4.3% for the third quarter, which is disappointing since it represents a decline from the record margin of 5.19% achieved in the second quarter, Chiodo said in a note.
The third-quarter lock volume guidance range of $93-$98 billion is 7%-13% higher than BofA’s prior estimate of $86 billion.
The analyst said the company’s loan volume guidance of $82-$85 billion also implies market share gains of 175-200 basis points on current industry origination forecasts.
While Rocket Companies projected a decline in volumes in the fourth quarter, this “is based on normal seasonal patterns in the housing market, not weaker demand,” Chiodo said.
See Also: Rocket Companies First Quarterly Earnings Report Shows Closed Loan Volume Up 126% At $72B
Why Credit Suisse Is Sidelined On Rocket: The company enjoys an industry leading position due to its technology platform and high recapture rates, and has prospects for market share gains ahead, Kupferberg said in a note.
“We continue to look for an opportunistic entry point, further signs of purchase market share gains, and/or potential for capital allocation for more optimism on the shares,” the analyst said.
The midpoint of the GoS margin guidance range missed Credit Suisse’s estimate of 4.27%.
Rocket's lock volume guidance for the third quarter came in higher than Credit Suisse’s estimate of around $81 billion, implying 10-11% market share based on industry origination forecasts.
RKT Price Action: Rocket shares were down 13.48% to $27.09 at last check Thursday.
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