Mortgage Market Bottom? Why Rocket Companies Could Be a Buy

Recent trends in the real estate market have made many investors cautious about investing in related stocks. However, there are exceptions where certain stocks appear to have a better risk-to-reward ratio, presenting opportunities for value and momentum investors.

For example, shares of Zillow Group Inc. (NASDAQ: Z) have highlighted significant weaknesses in the housing market. The company has reported a decline in transactions, with a growing focus on rental income. This trend indicates that many consumers are opting to rent rather than purchase homes right now.

These issues may discourage some investors from looking at mortgage and real estate finance stocks. A recent drop in shares of SoFi Technologies Inc. (NASDAQ: SOFI) by 12% has further fueled these concerns following disappointing quarterly earnings. Despite these declines, one company has recently begun to show strong performance, and that’s Rocket Companies Inc. (NYSE: RKT).

Rocket Companies: A Potential Value Play

Currently, Rocket Companies is trading at around $13.08. Given that this price is just 61% of its 52-week high, many investors believe that any negative scenarios may already be reflected in the stock price.

When examining the mortgage market index, it's clear that it is at historically low levels, comparable to those last seen in 1996. This suggests that any uptick in mortgage volume could positively impact the company’s earnings and fees.

Rocket Companies has a competitive advantage over companies like Zillow and SoFi, which trade close to their highest valuations. They may have missed out on the advantageous pricing Rocket Companies has, as these other companies trade within 90% of their peaks, indicating that a lot of their potential growth may have already been factored into their stock prices.

Moreover, recent activity shows that large institutional investors, such as the Vanguard Group, increased their stake in Rocket Companies by 3.6% as of February 2025, raising their total investment to about $140.9 million.

The stock has rallied impressively by 12.7% over the past month, indicating strong buyer interest. As more investors realize the attractive risk-reward ratio, demand for Rocket Companies stock is likely to increase.

Wall Street’s Perspective on Rocket Companies

In addition to investor interest, market analysts share a favorable outlook for Rocket Companies. The Royal Bank of Canada set a price target of $18 per share, presenting a potential 38% upside based on their expectations of a bottoming mortgage market.

Analysts anticipate that Rocket Companies might see earnings per share (EPS) reach up to $0.14 in Q2 2025, nearly doubling the current rate of $0.08, which could help the stock surpass recent highs.

The broader market is also considering these future earnings forecasts. A positive perception could lead to a premium valuation for Rocket Companies, which is currently trading at a price-to-book (P/B) ratio of 3.1x, significantly higher than the industry average of 1.8x.

While some investors perceive this as expensive, experienced investors recognize that the market often rewards stocks viewed as potential outperformers, and that is precisely the trajectory Rocket Companies has begun to demonstrate.

In the last month, Rocket Companies has outperformed the S&P 500 by approximately 18%, signaling where market momentum is shifting. Overall, both fundamental and technical factors suggest a favorable risk-reward scenario for investors considering Rocket Companies.

Conclusion

With shifting market dynamics and potential for future growth, Rocket Companies may prove to be an appealing investment for those monitoring the mortgage market's recovery.

investment, stocks, housing