2 Reasons for Investors to Consider Buying RKT Stock

Rocket Companies (NYSE:RKT) is a leader in the mortgage lending industry and it went public last year. The company offers technological solutions for real estate, mortgage and e-commerce businesses. RKT stock has had a wonderful run over the last few months. 

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After going public at $18 in August 2020 with a valuation of $35 billion, RKT stock hit new highs. However, it is significantly down since reaching its all-time high.

While 2020 has not been a great year for IPOs, Rocket Companies is an exception. The stock hit an all-time high of $41 in March and is changing hands at $22.30 this morning. There are several reasons for the decline, including a sizeable amount of shorting of the shares.

Over the past month, the stock has been volatile. It is trading close to its March low and it looks like the stock will remain steady for now, although it could hit $25 in the coming weeks. 

I believe that the stock is a good pick and could climb in 2021. Here are two reasons to keep it on your radar.

Stable Financials

Rocket’s  revenue growth is outstanding, and its  2020 revenue was impressive. Its sales increased nearly 300% from $5.1 billion in 2019 to $15.7 billion last year.  The company’s net income soared six times in 2020, coming in at $8 billion. Rocket’s revenue is only expected to increase in coming years. 

For the fourth quarter of 2020, it reported earnings per share of $1.09. It is expected that the company will generate higher revenue and EPS during the current quarter than in Q4. Since being launched, Rocket’s  transaction volume has exceeded $1 trillion. Consumers appear to be satisfied with the company’s business model and enjoy its data-driven solutions. 

Rocket has a forward price-earnings ratio of 8.47, while its industry’s average forward price-earnings ratio is 31.96. This shows that the stock is trading at a great discount. As a result, it’s a wonderful time to buy RKT stock. 

Dividend 

In February, the company paid a special dividend of $1.11 per share and the dividend was paid out in March,  so the owners of RKT stock have already benefitted from the growth generated by the company.

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Not all companies pay dividends right after going public, but Rocket Technologies is in that category. 

Wall Street Loves the Stock

I am bullish on the stock and so are Wall Street analysts. Out of ten analysts whose ratings are tabulated on Tipranks, three have a “buy” rating on the shares and seven have a “hold” rating on it. Their average price target is $2. 

There are, however, analysts who believe that the stock will go down as mortgage rates climb. Since fewer people may want to buy homes as rates increase, there is a certain risk associated with the stock. However, these increases will not hurt Rocket’s overall business because people will be eager to refinance their loans as the pandemic ends and normalcy resumes. Indeed, Rocket is expected to report strong Q1 results.

The Bottom Line on RKT Stock

I believe in buying quality stock on weakness, so RKT stock could be a great addition to investors’ portfolios. Its revenue is soaring and its market share is large. Rocket’s outlook is attractive, and it’s facing only moderate risks. Given the company’s unique way of approaching the market and its highly effective utilization of technology, RKT stock will soar. 

I think the name is a great buy at its current levels. If its Q1 results beat analysts’ average expectations, the stock will go higher. The company is due to report its Q1 results on May 5.

This rocket is not landing anytime soon, so bet  on it now. 

On the date of publication, Vandita Jadeja did not have (either directly or indirectly) any positions in the securities mentioned in this article.

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View more information: https://investorplace.com/2021/05/2-reasons-to-consider-buying-rocket-stock/

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