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Why Rocket Companies Stock Crashed Today

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

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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.

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

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