Is $RKT a buy?
It’s time to talk about a new name on the block. Here is the breakdown of $RKT otherwise known as Rocket Companies.
Current Price: $24.57
52/Wk High: $34.423
52/Wk Low: $17.50
Read below for the breakdown.
Rocket companies is a popular holdings company in which is the provider of the well-known mortgage platform Rocket Mortgage.
Rocket Mortgage is a digital platform that offers all services related to the mortgage market for the individual. Not only that but $RKT is also the parent company of Quicken Loans, one of the most popular names around.
Given the recent real estate boom it seems that the mortgage market should be on fire and many are left wondering whether $RKT is a solid pickup, especially after its major pullback last week.
Digging into the numbers Rocket Companies delivered a huge beat on Q2 earnings just last week. Due to its recent IPO, the company did not deliver EPS but revenue blew away expectations.
Expected Q2 revenue was $3.75 billion but $RKT blew that away with a sky-high $5.04 billion, representing a YOY revenue growth of 437%. Not only that but $RKT also recorded a huge $3.46 billion in net income.
The report also noted that closed loan volume grew 126% during Q2 to a whopping $72.32 billion.
Furthermore, $RKT management is expecting net rate lock volume in the range of $93 billion to $98 billion. Along with net rate lock volume set to increase, closed loan volume is expected to increase as well, within a range of $82 billion to $85 billion for the upcoming Q3.
If the expected volume for closed loan volume is met in Q3, that range would represent a whopping 105% to 112% YOY growth.
While banks struggle to grow due to low-interest rates, Rocket Companies is benefiting, due to the attraction from consumers of low-interest rates, making it a great time to barrow.
Digging further into the balance sheet Rocket Company's financial standing is not bad but not terrific. As of 03/31/20, the company reported a total debt of $15.601 billion.
On the bright side, as of August 9th, the company retained a reported $2.2 billion in cash which while smaller, is a solid amount of backing for the company's balance sheet.
The analysts are also quite bullish on $RKT. Currently, the average price target is $28.36/share representing a solid 15.43% gain.
Secondly, the high price target is $35.00/share, representing a 42.45% gain and the low is $18.00/share, representing a -26.74% loss.
The big money on the other hand is simply too early to tell and institutions have not yet taken any major positions.
When looking at the charts the slim amount of data seems to be flashing an opportunity. Currently, the 6-month RSI is trending down and sits at 50.44, which in general is not a bad buying location.
As we all know though, RSI is not everything and CCI sits at a low 0.453. Not only that but $RKT sits $9.853 off its highs.
It is also important to note that $RKT currently trades at a minimal price to earnings ratio of 10.14, which is far below many of the hottest stocks this year.
Overall, I like $RKT long term but urge caution in the short term. I firmly believe that Rocket Companies will continue to grow but shares could fall more if the market sell-off continues.
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Disclaimer: This is not direct financial advice, simply opinion based on independent research. Luke Donay and Running With The Money is not responsible for any investment made based on the published information.