With a short interest rate of 39.7%, why can rocket mortgage stake rise

With a short interest rate of 39.7%, why can rocket mortgage stake rise


Why a profitable company whose revenue tripled among the most selling stocks on the market?

rocket mortgage stake rise
With a short interest rate of 39.7%, why can rocket mortgage stake rise


Rocket Mortgage, a Detroit-based company that creates and sells housing loans, is the company involved. I think the reasons for buying this stock - 39.7% of its float sold short, according to the Wall Street Journal - are more urgent than the case of short selling.


Here are three reasons for rocket mortgage shares - which have fallen by nearly 13% since they reached nearly $30 on IPO day in August 2020, according to Morningstar-


Outstanding financial results and guidance

Special return

Trading below the target price

Bear v. Stock Case:


Higher interest rates could slow demand for mortgages

Stocks are traded on a large premium to their peers

(I have no financial interest in the securities mentioned in this publication.)


Outstanding financial results and guidance

The Wall Street Journal reported that Rocket Mortgage , which includes "Quicken Loans, the nation's number one mortgage lender, Amrock, home search platform Rocket Homes, personal loan provider Rocket Loans, and Rock Connections" gave investors a great opportunity to report profits on February 25.


That's when Rocket reported a more than threefold increase in revenue for 2020 -- from $5.1 billion to $15.7 billion, with revenue rising 9.4 times to $9.4 billion, the Detroit Free Press reported.


Fourth quarter results exceeded Estimates . Rocket's earnings were $1.09, up 22 cents, while quarterly revenue was $4.78 billion -- exceeding expectations by $80 million, according to TheStreet.com.


For the current quarter, Rocket expects what the magazine called "better-than-expected guidance."


As Chief Financial Officer Julie Booth said, Rocket expects "closed loan volume from $98 billion to $103 billion compared to $51.7 billion in the first quarter of 2020 up from $56 billion in the first quarter of 2020 From Rocket.


Special return

Rocket has made so much money that it has issued special dividends to be paid to shareholders as of March 9. As noted, Rocket will pay these shareholders "new and one-time special dividends of $1.11 per share, which will total $2.2 billion."


Trading below the target price

While analysts' price targets are not scientific, the average target of $25.14 is slightly higher than where rocket rocket closed on March 1. "Based on seven analysts offering 12-month price targets to rocket companies in the last three months. The average target price is $25.14 with a high forecast of $33.00 and a low forecast of $19.00. Tip Ranks indicates that the average target price represents an increase of 3.46% from the last price of $24.30.


Higher interest rates could slow demand for mortgages

The betting that rocket shares will fall depends on higher mortgage rates and high valuation.


Mortgage builders are generally hurt by high mortgage rates because it means that fewer people may want to refinance or buy a home.


This increase does not harm Rocket's business. Although mortgage rates rose in the last week of February to their highest level since August, Rocket told investors that "it expects its record fourth-quarter turnover to remain mostly stable in the first quarter of 2021," the paper said.


Stocks are traded on a large premium to their peers

Short sellers can prove that Rocket shares are overpriced compared to their peers. In fact, the magazine noted that Rocket achieved "an excellent rating about 11 times ahead of its earnings report for FactSet for 2022 - nearly twice that of its peers - about six times that."


These days stocks are not traded on valuations, but move on the basis of whether they outperform agreed revenue and profit growth estimates and raise their guidance.


As long as Rocket continues to do so, its shares are likely to benefit - and the over-interest in this stock could throw gasoline on this upward blast.