Mortgage Market Bottom? Why Rocket Companies Could Be a Buy

Recent trends in the real estate market have made investors quite cautious about putting their money into stocks related to this sector. However, not all stocks are equally affected, and some present more favorable risk-reward scenarios for investors interested in value and momentum.

To illustrate this point, Zillow Group Inc. (NASDAQ: Z) has demonstrated the current weakness in the housing market. It reported lower transaction volumes, emphasizing rental income over home sales. This indicates that many consumers are opting to rent instead of buying homes.

This situation might deter some investors from considering mortgage and real estate finance stocks. A clear example is the 12% drop in shares of SoFi Technologies Inc. (NASDAQ: SOFI), following disappointing quarterly earnings results. Yet, amidst this decline, one stock is making waves: Rocket Companies Inc. (NYSE: RKT).

The Worst Is Already Priced In for Rocket Companies Stock

Current Outlook on Rocket Companies

As of February 14, 2025, shares of Rocket Companies are trading at $13.08, with a slight increase of 1.67%. Given its trading price at just 61% of its 52-week high, it seems that investors have already factored in the worst-case scenario for this company. In fundamental terms, the mortgage market index is at its lowest point since 1996.

This indicates that potential gains are imminent when the overall mortgage volume begins to rise. As Rocket Companies stands to benefit from any uptick in the mortgage market, investors can find comfort in its current stock price, which presents a solid discount. This stands in contrast to Zillow and SoFi, which traded close to 90% of their highs, suggesting they were already at their peak valuations.

Additionally, there has been a noticeable increase in purchasing activity for Rocket Companies. For instance, the Vanguard Group bolstered its holdings in Rocket by 3.6%, bringing their total investment to approximately $140.9 million. Such positive movement in stock ownership is a bullish signal for potential investors.

Rocket's stock has seen a considerable 12.7% rally in the past month, indicating a growing interest from buyers who recognize the favorable risk-reward scenario this stock offers.

The Market’s Perspective on Rocket Companies Stock

The market’s perception of Rocket Companies is also worth noting. Analysts at the Royal Bank of Canada set a price target of $18 per share for Rocket, forecasting significant upside potential of around 38%. This reflects their belief that the worst for the mortgage market is behind us.

Wall Street analysts project an earnings per share (EPS) increase to $0.14 for the second quarter of 2025, nearly doubling the current $0.08. This could potentially take Rocket's stock to new highs.

Currently, Rocket Companies trades at a price-to-book (P/B) ratio of 3.1, significantly higher than the mortgage industry average of 1.8. While this may seem overpriced to some investors, many seasoned professionals understand that the market typically rewards stocks that are expected to outperform their peers and the overall market—an expectation Rocket Companies might be on track to meet.

In the past month, Rocket Companies has outperformed the S&P 500 by approximately 18%, marking a clear shift in momentum and investor preference. Overall, the combination of solid fundamentals and market trends suggests a favorable risk-to-reward ratio for Rocket Companies.

Conclusion

Given the current dynamics in the mortgage market, Rocket Companies appears to stand out among other real estate stocks. For investors seeking potential opportunities, now might be the right time to consider adding Rocket Companies to their portfolios.

Mortgage, Investing, Stocks