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JPMorgan Upgrades Rocket Companies, Predicts Rotation To Credit-Sensitive Stocks

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JPMorgan Upgrades Rocket Companies, Predicts Rotation To Credit-Sensitive Stocks

Rocket Companies Inc (NYSE: RKT) shares traded slightly higher on Friday after a major Wall Street firm upgraded the stock.

The Analyst: JPMorgan analyst Richard Shane upgraded Rocket Companies from Neutral to Overweight and cut his price target from $31 to $28.50.

The Thesis: Shane said Rocket is both the biggest and the most profitable personal lending and mortgage finance company.

“Rocket has developed an integrated, end-to-end technology platform that is streamlining originations and disrupting a $2T market,” Shane wrote in the note.

He said Rocket is leveraging both scale and efficiency in the large and fragmented mortgage market.

Shane expects to rotate toward more credit-sensitive stocks, potentially creating bullish momentum for Rocket. In addition, he said there is upside to Rocket’s EPS in the second half of 2020 due to gain-on-scale margin improvements and elevated primary/secondary credit spreads.

Related Links: Rocket Companies Shares Surge On Realtor.com Partnership, Strong Housing Data

Rocket subsidiary Quicken Loans is leaning into an extremely strong 2020 housing market. In early September, the company reported a $3.5 billion second-quarter profit on revenue of more than $5 billion. Loan origination volume was a record $72.3 billion for the quarter, up 126% from a year ago.

Earlier this month, Rocket also inked a new advertising deal with popular real estate listings platform Realtor.com.

Near-zero interest rates continue to drive an extremely strong U.S. housing market. Housing prices are up 6% from a year ago, according to data analytics firm CoreLogic. In September, the average amount of time it took to sell a home fell to just 54 days, the shortest period since Realtor.com began tracking data back in 2016.

Benzinga’s Take: Investors will be watching to see if the housing market says hot in the fourth quarter and if the Realtor.com deal has any significant impact on Rocket’s numbers.

Latest Ratings for RKT

DateFirmActionFromTo
Nov 2020B of A SecuritiesReiteratesBuy
Nov 2020Credit SuisseMaintainsNeutral
Nov 2020Morgan StanleyMaintainsEqual-Weight

View More Analyst Ratings for RKT
View the Latest Analyst Ratings

 

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