Rocket Companies’ stock has taken a sizeable fall in the last couple of days after an analyst suggested traders sell their holdings.
Rocket’s stock — RKT, traded on the New York Stock Exchange — sat at $8.56 cents per share Tuesday afternoon, it’s highest level since late August. By this morning, that was down to $7.49, a drop of 12.5% over that span.
The stock is "back in the realm of ... the day traders and the Reddit crowd,” Argus Research Chief Compliance Officer and Senior Analyst Kevin Heal said in an interview Wednesday.
Wednesday morning, Heal downgraded Rocket’s stock from “hold” to “sell.” He said RKT’s value skyrocketed when Rocket Companies went public thanks to a boost from the Reddit group WallStreetBets.
He decided to downgraded RKT because of concerns about the mortgage industry overall, and his view of Rocket’s five-year outlook relative to its competitors.
Publicly traded companies in the mortgage industry saw earnings fall, but Heal was worried about Rocket seeing third-quarter net income fall more than 90% from last year.
Rocket did not respond to a request for comment, but in an exclusive interview in late October with National Mortgage Professional, CEO Jay Farner said the company is strengthening its standing by diversifying revenue streams.
“So I think Amazon is a great blueprint for where you're seeing Rocket,” Farner said.
Rocket has purchased companies that compliment it’s services, like TrueBill, now Rocket Money. The company has also tried to build vertically on its core as a mortgage company by offering services once customers buy their homes.
“Yes, we do mortgage, but — and I think you're picking up on it — comparing us to a mortgage lender will become more and more challenging as time goes on because we're thinking about the clients we have in our engagement platform,” Farner said.
Rocket also recently launched its Correspondent Assist program, which offers tools and support to lenders who otherwise weren’t partners with Rocket.
Heal didn’t think the moves were enough to overcome his concerns. He also expressed doubt that Rocket has the capital to take on fintech rivals like SoFi and Chime.
“There were countless others that had the same business model that went by the wayside,” he said.
(Editor's note) Correction: A previous version of this story quoted Heal's report saying Rocket had $9 billion in loans that investors don't want. Rocket has $9 billion in mortgages, but the company says it will has pooled those loans and will sell them in a short time frame.
