What happened
Shares of the mortgage company loanDepot (LDI 0.86%) dropped as much as 10% earlier this morning after the company reported earnings results for the fourth quarter and full year of 2021. As of 11:15 a.m. EST today, shares are trading about 6% down.
So what
loanDepot reported diluted earnings per share of $0.05 on total revenue of about $705 million, both numbers that missed on analyst estimates.
Total revenue is significantly down from what the company put up in the fourth quarter of 2020, which was a particularly good time for the industry: The low-rate environment drove incredibly strong origination volume and higher gain-on-sale margins.
Image source: Getty Images.
"Conditions like those we enjoyed in 2020 are when loanDepot drives revenue, but the conditions we expect in 2022 present an incredible opportunity for us to capture market share," loanDepot founder and CEO Anthony Hsieh said in a statement.
Hsieh added, "We are well positioned to demonstrate the long-term value of loanDepot by remaining focused on our strategic priorities while seizing market share from competitors that are less capable of withstanding these challenging conditions."
Now what
Mortgage companies that have gone public have had a rough go of it, as investors believe they have peaked along with the strong mortgage market in 2020 and now face an uphill battle as interest rates rise and mortgage rates with them.
Rising rates don't always spell doom for these companies, as they may temper home values and also make buying a home more attractive if the rents go up. The industry is also fragmented, so being able to gain market share could help a mortgage stock stand out.
Ultimately, there is a lot of uncertainty with market conditions, the economy, and how many times the Federal Reserve may raise interest rates this year. I am not buying loanDepot personally, but further analysis into the industry may shine a light on some potential long-term opportunities if they can take leading market share.
