UWMC Stock is a Question of Knowing What You Own

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United Wholesale Mortgage (NYSE:UWMC) appears to be on its way to the breakout its shareholders have been waiting for. As of this writing, UWMC stock is up 29% since May 7. Shares have been moving higher after the company reported bullish financial results in mid-May.  

An image of wooden blocks that say SPAC over a series of one dollar bills.
Source: Dmitry Demidovich/ShutterStock.com

If the trend continues, it seems likely that UWMC will push past the $10 mark. If nothing else that would be a symbolic victory for the stock. For those that are unfamiliar with United Wholesale, it came to market via a special purpose acquisition company (SPAC). As most SPAC stocks are initially priced at $10, UWMC stock has traded at a discount for quite some time.  

United Wholesale stock is trading at a discount with projections for robust growth. This is a bullish combination. Analysts give UWMC stock a buy rating with a $10.20 consensus price target. 

If you sense a “but” coming, you’re right. In this case, it’s that despite a long-term outlook that is still bullish, United Wholesale operates in a cyclical business. The wholesale broker concept relies to some extent on volume and rate volatility. And right now, neither one definitively works in the company’s favor.

Two Sides of a Coin 

The bullish and the bearish case for United Wholesale is two sides of a coin. As the mortgage market heated up in 2020, inventory was high and interest rates were fluctuating usually in the consumer’s favor. This makes the case for using a wholesale broker about as well as anyone can.  

When there is a large inventory of available homes and a dizzying rate of loan/rate options. A mortgage broker (essentially a middleman) is worth their commission.  

A direct-to-consumer model as convenient as the advertising makes it out to be, limits consumer’s options. However, this may not be as significant of an issue for the rest of the year. Interest rates are expected to remain stable, and inventory has tightened considerably. This makes speed of the essence. Whether direct-to-consumer truly offers that speed may be more psychological than real, but sometimes that’s all that matters.  

On the other hand, on June 30, 2021 the federal moratorium on foreclosures and evictions expires.  Dan Kruse, president and CEO of Century 21 Affiliated does not believe this will be a wave like the one that occurred between 2005 and 2010, but a tight market may benefit from some quality listings as homeowners look to get out from under their existing mortgages to avoid foreclosure.  

What About That Pledge? 

In March, UWM CEO Mat Ishbia announced that wholesale brokers who work with Rocket Companies (NYSE:RKT) or Fairway would no longer be able to work with UWM. In a previous article, I referenced claims made by Ishbia that only 500 out of 12,000 brokers would continue to partner with Rocket Mortgage. As it turns out, the actual number is slightly higher.  

In an interview with the Detroit Free Press, Ishbia said that the actual number was about 1,600. This broke down as 600 brokers who refused to sign the pledge and 1,000 who didn’t respond at all.  

Whether the number of defiant brokers is 4% (500 out of 12,000) or 13% (1,600 out of 12,000) is irrelevant. Either number shows that UWMC is garnering a high degree of loyalty from its network of brokers. Isbia pointed out the company’s 17,000 new loans in April as opposed to February as evidence that the “all in” initiative as he referred to it was working.  

Or is it? At least one broker has sued UWM on accusations that the company’s actions violate antitrust laws in what may become a class-action lawsuit. Pending litigation is generally an anchor on a stock. 

UWMC Stock Looks to Have a Ceiling and a Floor 

Isbia may be right about the success of his loyalty pledge. I still view this as an odd way for a company to respond to its competition. If you have a superior product, the market will realize it. But facts are facts. So let’s call that a victory for United Wholesale Mortgage. 

And the action by the company is sparking a debate about industry practices. This may ultimately be another catalyst for the stock.  

Just know what you’re buying. UWMC stock got tied up in the meme stock trade. And it also may have been a victim of SPAC fatigue. The former is the wrong reason to buy; the latter is the wrong reason to sell. I like the long-term case for UWMC as a value stock. The stock may have found its floor. But don’t expect it to “rocket” much higher than where analysts project.  

On the date of publication, Chris Markoch did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines. 

Chris Markoch is a freelance financial copywriter who has been covering the market for seven years. He has been writing for Investor Place since 2019. 

Chris Markoch is a freelance financial copywriter who has been covering the market for over five years. He has been writing for InvestorPlace since 2019.


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