BTIG Initiates Coverage on Rocket Companies with Buy Rating

BTIG initiates coverage on Rocket Companies with a Buy rating, expecting lower interest rates to drive earnings upside. Analyst Eric Hagen forecasts near-term growth opportunities for the retail mortgage lender. The company's stock gains following the coverage initiation.

BTIG, a leading financial services firm, has initiated coverage on Rocket Companies (NYSE: RKT) with a Buy rating, highlighting the potential for near-term earnings growth driven by lower interest rates. Analyst Eric Hagen expects that the reduction in interest rates could lead to an upside in the company's earnings, particularly in the near term.

Hagen's analysis focuses on the strategic opportunities that lower interest rates present for Rocket Companies. The retail mortgage lender has been a beneficiary of favorable market conditions, and the expected reduction in interest rates could further boost its earnings. The analyst's optimism is based on the assumption that lower rates will stimulate refinancing activity, which is a key driver of Rocket Companies' revenue.

The stock of Rocket Companies gained following the initiation of coverage by BTIG. The stock price increased by 3.47% during Thursday's morning trade, reaching $18.94. This positive reaction underscores the market's confidence in the analyst's assessment and the potential for growth in the company's earnings.

In contrast, Morgan Stanley recently resumed coverage of Rocket Companies with a cautious view, citing the strategic benefits of the acquisition of Mr. Cooper but also noting that most of the near-term upside is already priced into the stock. The investment bank maintains an Equal-weight rating with a $16.0 price target, reflecting its more conservative outlook compared to BTIG.

The mortgage market backdrop remains challenging, with mortgage interest rates continuing to fluctuate. According to NerdWallet, mortgage rates fell in the week ending August 14, with the 30-year fixed-rate mortgage averaging 6.66% APR. This trend is expected to continue, with analysts forecasting further reductions in mortgage rates, which could benefit Rocket Companies' earnings.

In conclusion, BTIG's initiation of coverage on Rocket Companies with a Buy rating reflects the potential for near-term earnings growth driven by lower interest rates. The company's strategic position and the expected reduction in interest rates present favorable conditions for the retail mortgage lender. However, the market's cautious view, as reflected in Morgan Stanley's Equal-weight rating, highlights the need for investors to consider the broader market conditions and the company's integration challenges.

References:
[1] https://seekingalpha.com/news/4487038-rocket-companies-lands-buy-rating-from-btig-in-new-coverage-stock-gains
[2] https://seekingalpha.com/news/4485444-morgan-stanley-resumes-coverage-of-rocket-companies-with-cautious-view
[3] https://www.nerdwallet.com/article/mortgages/mortgage-interest-rates-forecast