Key Points:
– Rocket Mortgage’s stock has been downgraded by analyst Bose George due to the company’s relative weakness in the purchase market.
– Refinance volume is expected to be low this year, which puts Rocket at a disadvantage since it historically had a larger share of the refi market compared to purchase.
Summary:
Rocket Mortgage’s prospects for the upcoming year may not be as positive as the company would hope, according to analyst Bose George. In a note published by Keefe, Bruyette & Woods, George downgraded Rocket’s stock based on its valuation and relative weakness in the purchase market. With low refinance volume predicted for the year, Rocket, which historically had a significant share of the refi market, may struggle compared to its peers with a larger focus on purchases. Although Rocket has taken measures to increase its purchase business, including rolling out new loan products and forming partnerships with community banks, George does not expect these initiatives to have a significant impact in the next few years. While the company’s stock price saw a significant increase in December, George believes this growth is unwarranted since the company’s earnings are not expected to benefit substantially from the recent reduction in rates. Rocket’s stock closed lower after the downgrade but showed a slight rebound in early trading.
