Mortgage Market Bottom? Why Rocket Companies Could Be a Buy

Recent events in the real estate market have made many investors cautious about stocks in this area. While it may seem risky to invest in real estate, there are some stocks that offer better opportunities for reward with manageable risks. One such opportunity lies in Rocket Companies Inc. (NYSE: RKT), which has recently been showing promising signs.

Investors could take cues from Zillow Group Inc. (NASDAQ: Z), which has highlighted the weakness in the current housing market. Zillow's recent reports show a decline in housing transactions, with a notable shift towards rental revenues. This indicates that consumers today are more inclined to rent or lease rather than buy homes.

This information could deter some investors from entering the mortgage and real estate finance space, as indicated by the recent 12% drop in shares of SoFi Technologies Inc. (NASDAQ: SOFI) following not-so-stellar quarterly earnings. However, amidst these discouraging trends, Rocket Companies has experienced a significant breakout.

The Potential Upside of Rocket Companies Stock

As of now, Rocket Companies stock is trading at around $13.08. This figure is approximately 61% off its 52-week high, suggesting that much of the negative impact has likely been accounted for in the stock price. In light of the current mortgage market index, which is at a level not seen since 1996, there appears to be considerable upside potential for Rocket Companies.

Should the mortgage volume increase in the broader market, one can anticipate an uptick in earnings and fees for Rocket Companies. Even if such earnings take longer to manifest, the stock's current discount makes it an appealing option compared to others. This is an essential point of consideration, as both Zillow and SoFi are trading close to their 52-week highs, which means their future growth benefits may already be reflected in their prices.

Another positive indicator is that investment firms like the Vanguard Group have recently increased their positions in Rocket Companies, showing confidence in the stock's potential. They boosted their holdings by 3.6%, raising their total investment to $140.9 million as of February 2025. This trend underscores the notion that many are beginning to view Rocket Companies as a worthwhile investment.

Moreover, Rocket Companies stock has seen a notable 12.7% rally in the past month alone, with expectations that more investors will follow suit as they recognize the appealing risk-to-reward scenario.

Market Sentiment on Rocket Companies Stock

To understand the market's perception of Rocket Companies, one can look at the price target set by the Royal Bank of Canada, which is $18 per share. This indicates a potential upside of 38%, suggesting that the market sees potential for recovery in the mortgage sector. Furthermore, Wall Street analysts predict that the company may report earnings per share (EPS) of $0.14 for Q2 2025, almost double the current figure of $0.08, which could propel the stock price higher.

Investors should also evaluate how the market feels regarding these future earnings. A favorable outlook generally hints at a premium market valuation compared to other stocks in the sector. Currently, Rocket Companies has a price-to-book (P/B) ratio of 3.1x, significantly above the industry average of 1.8x.

While some may argue that this valuation is steep, seasoned investors understand that the market often rewards stocks that exhibit potential for exceptional performance, and Rocket Companies appears to be one of these.

Over the past month, the stock has outperformed the broader S&P 500 by 18%, indicating a shift in market momentum favoring this stock. The combination of these fundamental factors and positive technical indicators suggests that investing in Rocket Companies today could provide a solid opportunity for those looking for value in the stock market.

Mortgage, Investment, Market