PreMarket Prep Stock Of The Day: Rocket Companies

Benzinga's PreMarket Prep airs every morning from 8-9 a.m. ET. During that fast-paced, highly informative hour, traders and investors tune in to get the major news of the day, the catalysts behind those moves and the corresponding price action for the upcoming session.

On any given day, the show will cover at least 20 stocks determined by co-hosts Joel Elconin and Dennis Dick along with producer Spencer Israel.

There are several catalysts that can move an issue higher or lower. Rocket Companies RKT is trading in the red on Friday, primarily due to a downgrade from Keefe, Bruyette & Woods, which makes this the PreMarket Prep Stock Of The Day.

Disappointing IPO After Early Success: In a year with some spectacular returns in the IPO market, Rocket Companies isn't one of them. The company made its debut Aug. 6 at $18 and put in a low that day at $17.50 that hasn't been seen since. The following day it ran to $26.85 then quickly retreated five days later to $18.31 and geared up for a big launch.

Over the next 13 sessions, it lifted off to its all-time high of $34.42 and all-time closing high at $31.31.

That was the same day as its first earnings report since going public. The company reported an adjusted EPS of $1.44, which beat the $0.88 estimate.

Good, But Not Good Enough: Despite the solid report, the issue was slammed in the session following the report and hasn't recovered.

After a much lower open, it attempted to rally but came up shy of the lower-end of the previous day’s range ($30.61), only reaching $29.15 and resumed its move lower. By day's end, it had slumped as low as $25.80 and ended the session down 15% at $26.50.

Follow Through On The Downside: The selling pressure didn't let up in the following session as it shed nearly another $2 and leaked again on the day after ($24.57 to $22.57). All in all, it was a 34% decline in only three days. By the end of October, the issue did not catch a bid until it came within its initial low ($17.50) when it bottomed on Oct. 30 at $17.78.

The rally off that low was landed at $22.59 on Nov. 17. Interestingly, it approached that level on four occasions this week, peaking between $22.52 (Thursday) and $22.84 (Wednesday).

Negative Catalyst: On Thursday night, Keefe, Bruyette & Woods downgraded the issue from Market Perform to Underperform and announced a $19 price target. The Street is acting on the downgrade as the issue is trading lower in the session by 2.8% at $21.75.

Benzinga CEO Disagrees: On today’s PreMarket Prep Show, Benzinga's Jason Raznick took exception with the downgrade and price target, saying Rocket "is much more than just a mortgage company."

His comments on the issue from today’s show can be found here:

Disclosure: Jason Raznick Dennis Dick are long shares of Rocket Companies.

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