Please ensure Javascript is enabled for purposes of website accessibility

Why Rocket Companies Stock Crashed Today

By Joe Tenebruso – May 6, 2021 at 7:02PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The parent company of Quicken Loans warned of a slowdown in the mortgage market.

What happened 

Shares of Rocket Companies (RKT -3.58%) fell 16.6% Thursday, following the release of the mortgage giant's first-quarter results.  

So what

Rocket's revenue soared 236% year over year to $4.6 billion. Its adjusted net income, meanwhile, surged 170% to $1.8 billion.

These impressive results were fueled by a 100% increase in closed loan origination volume, to $103.5 billion. Strong growth across the company's title insurance, property valuation, and settlement services also contributed to gains.

"While the mortgage business continues to perform -- with March producing our highest-ever purchase application volume -- we also had success in our other verticals," CEO Jay Farner said in a press release. 

A person is pointing to a stock chart that rises sharply and then falls.

Rocket Companies' stock price pulled back sharply Thursday. Image source: Getty Images.

Now what

Investors, however, appeared to focus more on Rocket's guidance. Management expects closed loan volume of $82.5 billion to $87.5 billion, which would represent a sequential decline of roughly 18% at the midpoint.

The tepid forecast coincides with the prospect of rising interest rates, driven in part by expectations for continued economic recovery and corresponding inflation. Higher mortgage rates tend to suppress demand for mortgage originations and refinancings, which remain the lifeblood of Rocket's business.

Several analysts, in turn, cut their price targets for Rocket's stock. RBC analyst Daniel Perlin and Jefferies analyst Ryan Carr both reduced their forecasts from $30 per share to $26 following Rocket's earnings report. 

Joe Tenebruso 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.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Rocket Companies, Inc. Stock Quote
Rocket Companies, Inc.
RKT
$6.47 (-3.58%) $0.24

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
342%
 
S&P 500 Returns
107%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 09/29/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.