Why Rocket Companies Stock Is Flying Higher Today

Source Motley_fool

Shares of Rocket Companies (NYSE: RKT) are soaring on Wednesday. The mortgage company's stock gained 11.3% as of 11:50 a.m. ET and was up as much as 15.7% earlier in the day. The jump comes as the S&P 500 and Nasdaq Composite showed modest gains.

A major Wall Street bank upgraded the stock following a recent acquisition announcement.

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Deutsche Bank says it's a buy

Deutsche Bank analyst Mark DeVries gave Rocket a boost, upgrading the stock from a hold to a buy and raising his price target to $16 from $14. DeVries cited the company's $9.4 billion acquisition of Mr. Cooper Group, a major home-loan servicer, which it announced just days ago.

The analyst believes that the acquisition puts Rocket on track to meet its ambitious 2027 market-share targets like capturing 20% of the refinance market. According to DeVries, the deal could provide "38% [earnings per share] accretion in 2027" while also reducing the company's earnings volatility throughout market cycles due to the $1.5 trillion of loans Rocket will gain from Mr. Cooper Group.

The stock carries a premium

The combination of these two mortgage giants creates a company with significant market share in both origination and servicing, making the company more resilient in different markets. There are, however, some inherent risks with such a large acquisition; it's no small task to integrate the two.

Furthermore, Rocket's stock looks pretty expensive compared to the competition even with the added earnings from the acquisition. I would stay away from it for the time being.

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*Stock Advisor returns as of April 1, 2025

Johnny Rice has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

Disclaimer: For information purposes only. Past performance is not indicative of future results.
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