RKT Stock: 3 Big Reasons Rocket Shares Are Gaining Today

It’s looking like the Redditors are hot for a new ride as shares of Rocket Companies (NYSE:RKT) took off in pre-market trading on Tuesday morning. RKT stock was up more than 14% by 7:30 a.m. Eastern.

Rocket Companies (RKT) Mortgage company on smartphone in dark room

Source: Lori Butcher / Shutterstock.com

RKT stock earned the second-highest volume of mentions on Reddit’s r/WallStreetBets over the previous 12 hours, according to data compiled by Unbias Stock. Familiar meme stocks GameStop (NYSE:GME) and AMC Entertainment (NYSE:AMC) continue to fascinate the retail crowd, in the top and third spots.

The surge comes after a big day on Monday, with investors trading about three times Rocket stock’s average daily volume, boosting the share price more than 11%. The shares started trading on the New York Stock Exchange with an initial public offering (IPO) in August 2020.

The move extended gains from Feb. 25, when the country’s leading mortgage originator announced that fourth quarter adjusted profits soared 350% on a 144% revenue increase versus Q4 2019. Those results will allow the Detroit firm to pay out a $1.11 special dividend.

In just two short years, the Detroit-based fintech company has quietly become America’s largest mortgage originator. And with only a 9.2% market share in a massive $2.2 trillion market, the company has ample room to grow.

RKT Stock Tied to Rates

As a mortgage originator, Rocket’s fortunes are tied to interest rates, and the 10-year U.S. Treasury note, specifically. The yield on those bonds, which increased to more than 1.6% last week, fell back on Monday to near 1.4%.

That easing in the yield could have been enough for investors to gain a bit of confidence in the state of the home financing market in the weeks and months ahead. Any slippage is a good omen for potential home purchases and refinancing.

Rocket primarily operates a mortgage origination business. Customers call (or more commonly, use its mobile app or website) to get a new mortgage or refinance. The firm will then either approve or deny the loan, quote rates and perform a title insurance check. In 2019, Rocket originated $145 billion of such mortgages. In the recently reported 2020 results, originations topped $320 billion.

On the date of publication, Robert Lakin did not have (either directly or indirectly) any positions in the securities mentioned in this article. 

InvestorPlace contributor Robert Lakin is a veteran financial writer and editor, following fintech, agtech and property tech startups.

Article printed from InvestorPlace Media, https://investorplace.com/2021/03/rkt-stock-3-reasons-rocket-gaining-reddit-stocks-wallstreetbets/.

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