Morgan Stanley Analyst Maintains Hold Rating on Rocket Companies Amid Acquisition and Elevated Valuation

Morgan Stanley analyst Jeffrey Adelson maintains a Hold rating on Rocket Companies with a $16.00 price target. He views the acquisition of Mr. Cooper as a strategic fit, but notes that the stock's recent 50% price increase has led to a valuation that already reflects much of the anticipated upside. Despite operational risks and a challenging mortgage market, Adelson recommends a Hold rating, indicating a wait-and-see approach for potential investors.

Morgan Stanley analyst Jeffrey Adelson has downgraded Rocket Companies (NYSE: RKT) to a Hold rating with a price target of $16.00. The downgrade reflects a cautious view on the stock's valuation and the operational risks associated with recent acquisitions, as well as the challenging mortgage market backdrop.

Adelson acknowledges that the acquisition of Mr. Cooper, valued at $9.4 billion in an all-stock deal, is a strategic fit for Rocket Companies. The deal allows Rocket to leverage its digital platform and high client retention rates to refinance in-the-money mortgages from Mr. Cooper's $1.5 trillion servicing book. This can serve as low-cost feedstock for Rocket's origination engine, enabling customer acquisition with minimal marketing spend [1].

However, Adelson notes that most of the near-term upside is already reflected in the current valuation. The stock has traded at a premium, reflecting its leading position, tech platform, and sensitivity to refinance cycles. The current premium is at its widest levels in 4.5 years [1]. Additionally, market expectations at today's valuation are elevated, and integrating two acquisitions simultaneously elevates operational risk. The mortgage and housing market backdrop remains challenging [1].

Shares of Rocket Companies were down 3.47% during Thursday's morning trade, closing at $18.94. The rating aligns with Seeking Alpha's Quant rating and the average sell-side analyst rating of Hold, while SA authors see the stock as Buy [1].

Despite acknowledging Rocket's strategic acquisitions, Morgan Stanley cites three key concerns: elevated market expectations at the current valuation, operational risks from integrating two acquisitions simultaneously, and ongoing challenges in the mortgage and housing market [3]. The investment bank has historically recognized Rocket’s premium valuation due to its leading position, technology platform, and sensitivity to refinancing cycles, but points out that the current premium is at its widest level in 4.5 years [3].

In other recent news, Rocket Companies reported second-quarter 2025 earnings that surpassed expectations. The company posted an earnings per share (EPS) of $0.04, exceeding the analysts’ forecast of $0.03, and reported revenue of $1.36 billion, beating the projected $1.28 billion [3]. Keefe, Bruyette & Woods raised its price target for Rocket Companies to $15.00 from $14.00 while maintaining a Market Perform rating [3].

References:
[1] https://www.ainvest.com/news/morgan-stanley-maintains-equal-weight-pt-89-97-2508/
[2] https://seekingalpha.com/news/4485444-morgan-stanley-resumes-coverage-of-rocket-companies-with-cautious-view
[3] https://ca.investing.com/news/analyst-ratings/rocket-cos-stock-rating-resumed-at-equalweight-by-morgan-stanley-93CH-4158015