What happened

Shares of Rocket Companies (RKT -1.93%) jumped 4.5% on Wednesday, following positive analyst commentary.  

So what 

Wells Fargo analyst Donald Fandetti raised his rating on Rocket's stock from equal weight to overweight. He now sees the mortgage titan's share price climbing to $10, up from a previous forecast of $6.50. If he's right, shareholders could enjoy gains of roughly 19% from the stock's closing price on Wednesday.

Fandetti acknowledged that the residential mortgage industry was dealing with serious challenges. Most notably, the Federal Reserve's moves to raise interest rates in hopes of taming inflation are taking a heavy toll on the housing market. Sharply higher mortgage rates are making it significantly more expensive to purchase homes. They're also denting demand for refinancings. 

Yet Fandetti believes Rocket could benefit from these market disruptions. The mortgage leader's financial strength should help it weather the storm better than its smaller rivals.

Now what

Rocket's total net revenue fell 41% year over year to $2.7 billion in the first quarter. Its net income, in turn, plummeted 63% to $1 billion. The declines were driven by a 48% plunge in loan origination volumes.

Rocket's mortgage business is likely to remain under pressure in the coming months. Inflation has remained persistently high, and the Federal Reserve has indicated that it stands ready to raise rates further if that continues. 

However, Rocket could gain market share if a downturn in loan demand drives some of its weaker competitors out of business. It's also well positioned to profit from an eventual recovery in the mortgage market, particularly if interest rates pull back.