The Alternative Finance News team has been on a roll lately, making some very profitable calls. Check out our call on Tesla, when it was trading around $400, speculating a price target of $1000. As of this writing, Tesla has broken out to $505 on news it is joining the S&P500. Pretty big gains! Not to mention our DraftKings call from October, which is up about 30%. Thankfully, for those who missed out on those massive rallies, we have another call. Rocket Companies, Inc. We recently wrote about how undervalued the company, but now we are taking it one step further. Below we analyze why we believe Rocket Companies Stock Will Explode 50% Soon.
Rocket Companies Stock Is Extremely Undervalued
Have you read our previous article on Rocket Companies?
We discuss why the company is extremely undervalued for a variety of reasons.
Yet, the stock continues to trade in the $20 range.
What gives? And why are we so bullish?
Well, there are too many reasons to count, so let’s start with an analysis by Simply Wall Street.
In this report, the analysts provide a very reasonable Price to Earnings Ratio vs. Industry Average.
They analysts note that Rocket Companies is trading at a PE Ratio of 2.6x compared to the industry average of 12x.
Even worse, the market average PE Ratio is actually trading around 19.
Most tech stocks are actually trading wayyy above that in the atmosphere, especially EV and most momentum tech stocks.
More Analyst Ratings
Simply Wall Street is not the only group with bullish forecasts for Rocket Stock.
Below is an aggregate analysis from CNN Business on the company:
The forecast concurs with our analysis:
The 14 analysts offering 12-month price forecasts for Rocket Companies Inc have a median target of 24.50, with a high estimate of 35.00 and a low estimate of 19.00. The median estimate represents a +16.89% increase from the last price of 20.96.
The average forecasted price is about $24, which is still a 16% increase.
You can find the full analyst rating here.
You might be asking, “The P/E Ratio is low and some analysts believe the stock is going higher…so what?”
I refer you to the great Warren Buffet, who said:
“The stock market is a device to transfer money from the impatient to the patient.”Warren Buffett
How do you think Warren Buffett made all his money? Patience.
His billions come from holding stocks long term.
Not just any stocks, he finds the most valuable stocks and holds them for a long time, even increases his position in many cases.
Imagine he sold his portfolio every time a stock went up or down a little.
That is no way to invest. That is just day trading, which we try to avoid when it can be avoided.
An investment is finding reasonably priced companies and holding them for long term growth, and that is exactly what we believe is happening with Rocket Companies.
If you continue on in the Simply Wall Street report, they very clearly show the fair value of the stock.
According to their analysts, Rocket Companies is undervalued significantly, where the “fair value” is approximately $35.
That is even more bull than our thesis that Rocket stock will explode 50%, which would give it a price target of $30.
In any case, we believe both are still incredibly cheap considering the company’s growth is extraordinary.
If Rocket Companies were to be valued like other big momentum tech stocks (which it is), the real price would be approximately $100.
We predict the stock will reach $100/share in the future, perhaps sooner than we all expect.
We forecast it is approaching the time for Rocket Stock to explode at least 50%.
For those holding the stock, wondering why it is lagging so hard behind virtually every other overvalued momentum stock, do not worry.
I have been trading for a while and have seen this many times with recent IPOs.
If you would like to research this for yourself, just look at the first year or so of virtually any IPO, particularly tech stocks. But what is the overall bullish thesis on Rocket Stock?
The Google Trend Is Your Friend
First, what are the Google Trends saying? See below:
As you can see, the stock price and Google Trends searches are almost identical.
Currently, the search results are in what we call the, “goldilocks” area (above 25, below 75 range) where the stock is not under or over hyped.
We believe this will change drastically when the time comes as the stock pumps 10%+ in one day.
It has happened before, and it will happen again. We have seen it many times.
Not that long ago, in August of 2020, the stock IPO’d and by September, it essentially doubled from $17/share to $34.
The stock has not recovered to the all time high price, as of November 19, 2020, but we believe it will very soon.
The Magic “Gap”
What many new traders are unaware of is the magic of market algorithms.
There are certain areas of knowledge you begin to accumulate over time the more you trade.
It costs money to learn these lessons, as you lose trades trying to figure out how the market works.
So let me share one of the most powerful secrets I know of in trading…”The Gap.”
The best way to define a gap can be found in this Investopedia article on the subject.
They describe it as:
A gap is an area discontinuity in a security’s chart where its price either rises or falls from the previous day’s close with no trading occurring in between. Gaps are common when news causes market fundamentals to change during hours when markets are typically closed, for instance an earnings call after-hours…
There four different types of gaps – Common Gaps, Breakaway Gaps, Runaway Gaps, and Exhaustion Gaps – each with its own signal to traders.
Essentially, a gap is a break in the normal price movement of a particular security.
These gaps generally occur, but are not limited to, overnight movements on some type of extremely positive or negative news for the stock.
Check out this massive gap on Rocket Stock:
How is the Gap Relevant To Trading The Bullish Thesis?
It has taken me years to develop a system of figuring out the most profitable ways to trade.
One of the most powerful strategies I use is exactly this gap trade.
Essentially, whenever there is a large gap located in the chart pattern of a particular stock, I will try to buy or sell according to the location of the gap.
In the case of Rocket Stock, the gap is at approximately $30.69.
It should be noted here that the $30 price range is about a 50% move from the current trading area.
If the chart were to “fill the gap” it would be approximately a 50% profit, and this is essentially the foundation of our bullish thesis.
Historically Low Mortgage Rates
To be fair, there is not enough time in the day to go over all of the bullish factors for Rocket Stock, so we will simplify them.
Starting with historically low mortgage rates.
First and foremost is the fact that mortgage rates are the LOWEST in human history.
As Forbes writer, Natalie Campisi writes in the article:
Mortgage rates made history again this week. Interest rates on the 30-year fixed-rate mortgage sunk 12 basis points to 2.72%, a historical low.
Existing home sales shot up for the fifth consecutive month in October, rising 26.6% year-over-year, amid political and economic turmoil. Some 6.85 million home sales were the highest since November 2005, says Joel Kan, associate vice president of economic and industry forecasting at the Mortgage Bankers Association.
Mortgage rates are at the lowest in history and existing home sales are up 26%+ year over year…
This is VERY BULLISH for the company and even the housing industry as a whole.
Positive Company Developments
If you are not convinced yet, these positive company developments may help.
Rocket Companies recently issued a press release titled, “Rocket Mortgage and Amrock Continue to Set Bar for the Nation in Digital Closings Throughout 2020.”
The release reads:
DETROIT, November 19, 2020 – Rocket Mortgage, America’s largest mortgage lender, and Amrock, one of the nation’s largest providers of title insurance, property valuations and settlement services, delivered 90% of all digital closings with eNotes through the first three quarters of 2020, according to data provided by the Mortgage Electronic Registration System (MERS) eRegistry.
In just the first nine months of 2020, Rocket Mortgage and Amrock, both of which are subsidiaries of Rocket Companies (NYSE: RKT), have more than doubled the number of digital closings they completed in all of 2019. The growth of eClosings was accelerated by the COVID-19 pandemic – a change which is sure to stay now that there is widespread adoption – and demand – from clients. Digitizing the mortgage experience and removing manual steps in the closing process increases efficiency, ensures that every transaction is consistent and reduces opportunities for human error – such as missing signatures on the closing documents, which is one of the most common closing errors.
That is a lot of digital closings…
Read the entire press release, it is pretty good if you are, or considering, a long term investment into the company.
All About the Customer
Next, we have the company’s satisfactions ratings.
Another press release reads: #1 in the U.S. for Client Satisfaction in Mortgage Origination by J.D. Power for the 11th Straight Year
DETROIT, November 9, 2020 – Rocket Mortgage by Quicken Loans, the nation’s largest mortgage lender and a subsidiary of Rocket Companies (NYSE: RKT), was today named #1 in the nation for client satisfaction in primary mortgage origination by J.D. Power. This is the record 11th consecutive year Rocket Mortgage has earned the accolade, which is based entirely on client feedback collected by the independent research firm.
That’s a lot of customer satisfaction, about 11 years at #1 to be exact.
Promise we are almost done!
Finally, we have Rocket Companies’ subsidiary Lendesk Technologies, recently acquired Finmo.
The company press release reads:
VANCOUVER, BRITISH COLUMBIA — October 27, 2020 — Lendesk Technologies, the premier FinTech provider for Canada’s mortgage industry professionals, today announced its acquisition of Finmo Financial Technologies – the fastest growing mortgage origination platform in Canada.
Lendesk provides technology that seamlessly connects mortgage brokers with its network of over 200 lenders. The company’s Lender Spotlight product allows brokers to find up-to-date mortgage rates, lender policies and product guidelines from lenders across Canada, and compare them side-by-side to find the best option for their clients.
Hmm…Is RKT taking over the global digital mortgage industry?
It appears so…
We believe, the recent company expansion plans are massive…massively bullish that is.
As the company expands, expect more of these strategic acquisitions from its subsidiaries.
In the long run, these will help the company reach wild earnings growth.
Speaking of which…
The company has also decided to buy back $1 Billion USD of its shares by using its extraordinary profits.
You can check out the details here.
Hope this helps on why we believe Rocket Companies Stock Will Explode 50%. The company’s previous growth track record is impeccable, and we believe it actually just the beginning.
We are not recommending to buy or sell any security, this article is intended to be a personal bullish thesis on Rocket’s potential extraordinary future growth.
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Did you know? the team at Alternative Finance News has made some really impeccable calls lately.
Tesla broke out to new all time highs. And yes, we predicted this move, which you can read find here.
And more recently here.
The EV Boom is ongoing. Have you checked out our article on the Kensington Capital Acquisition Corp (KCAC) and QuantumScape Merger?
KCAC recently skyrocketed 35%, and yes we predicted that also. Check it out here!
Last, but not least, Bitcoin (BTC) also broke out of a long consolidation, and is now almost back to all time highs.
We predicted that as well. You can check out our full forecast here.