RBC raises Rocket Cos stock target on growth prospects, keeps Sector Perform rating By Investing.com

RBC Capital Markets has adjusted its outlook on Rocket Companies Inc. (NYSE: RKT), increasing the price target to $20.00 from the previous $16.00. The firm maintained its Sector Perform rating on the stock. The revision follows Rocket’s investor day presentations, which emphasized its expanding capacity and market share gains.

Rocket’s management set ambitious goals for the company, aiming for a purchase origination market share of 8% and a refinance share of 20% by 2027. These targets mark a significant increase from the first half of 2024, where the company held approximately 4% in purchase originations and 12.3% in refinances. The projections suggest potential originations ranging between $150 billion and $250 billion, within a market size of $1.5 trillion, akin to 2023’s level, to $2.5 trillion in what is considered a normalized market scenario.

The company plans to leverage acquired Mortgage Servicing Rights (MSRs) as a strategic avenue for generating volume while incurring minimal customer acquisition costs. This approach is seen as a key driver for Rocket’s anticipated growth.

Rocket Companies reported impressive financial results, with a 23% increase in adjusted revenue, reaching $1.228 billion in the second quarter of 2024. This growth was attributed to strategic acquisitions and the implementation of artificial intelligence (AI) to enhance customer service. The company added 67,000 new clients and approximately $21 billion in unpaid principal balance. The projected adjusted revenue for Q3 is estimated between $1.150 billion and $1.300 billion.

In addition to financial growth, Rocket Companies announced the appointment of Dan Sogorka as General Manager of Rocket Pro TPO, the mortgage broker division. Sogorka, an industry veteran, will oversee the growth and strategic direction of Rocket’s broker business.

The company also hosted its first Investor Day where the leadership team shared its AI-driven strategy for homeownership and financial objectives. The event included presentations from top executives and a chat with company founder, Dan Gilbert.

InvestingPro Insights

As Rocket Companies Inc. (NYSE: RKT) sets its sights on ambitious market share targets, the financial metrics and analyst insights from InvestingPro provide a nuanced perspective on the company’s valuation and performance. Currently, Rocket Companies boasts a market capitalization of $37.52 billion, reflecting its substantial presence in the market. However, with a P/E ratio standing at 195.05 and further stretching to 202.67 over the last twelve months as of Q2 2024, the company is trading at a high earnings multiple, indicating a premium valuation by investors.

Despite the high valuation, Rocket Companies has demonstrated strong growth, with a revenue increase of 25.21% over the last twelve months as of Q2 2024, and a robust return on assets of 1.58%. This growth narrative is complemented by a remarkable three month price total return of 29.62%, underscoring the stock’s recent performance. InvestingPro Tips also highlight that the company’s liquid assets exceed its short-term obligations, suggesting a healthy liquidity position.

Investors looking to delve deeper into Rocket Companies’ financial health and future prospects can explore additional insights and tips on InvestingPro, which lists 11 more tips for a comprehensive analysis. For those considering whether to take a position in RKT, these additional tips could prove invaluable in making an informed investment decision.

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