A look at Rocket Companies (NYSE:RKT) stock might make you think that the company has gone from good to worse in no time.
The mortgage loan provider saw its stock go from $43 in March to $16 today. RKT stock hasn’t had a good ride lately, but it has strong potential. The stock declined 20% in the three months and this dip is the perfect chance to add it to your portfolio.
I had recommended a buy when it was trading at a similar level in June. Although RKT stock hasn’t moved much over the past few months, it certainly has the potential to grow in the long term.
Let’s dig deeper into the catalysts driving RKT stock higher.
Massive Growth Opportunities
One major reason to invest in RKT stock is the profits from multiple business segments. The company does not depend on one source of revenue and has income coming from various segments including real estate, personal finance brands, mortgage and auto.
A decline in one industry will not have a major impact on the bottom line. The company has expanded into different segments, namely, Rocket Auto, Rocket Homes and a solar program that will provide ample growth opportunities and will take RKT stock higher.
Rocket Companies was already growing at a fast pace and the new business segments will take the company to new highs. It aims to provide an all-in-one service to consumers.
People can get a mortgage loan, home appraisal and insurance, solar panels and auto insurance from one place. The company has already started offering these services to consumers and the long term goal certainly seems achievable.
Stellar Financials
The fundamentals of the company are solid. There is no doubting the health of the company. Its revenue is consistently growing, and it is much bigger than it was four years back. It also has a positive net income. For the second quarter, the company reported a revenue of $2.67 billion.
The company’s volume of mortgage for new homes doubled year over year in the second quarter but the low rate of interest had an impact on the bottom line. The revenue has declined but the company has found a way to reduce the risk and has established new revenue sources. I think the doubling of mortgage volume is not something investors should ignore.
The housing market is going strong and experts believe it is ready for a boom. There is a massive rise in home price growth, and it could be due to the low mortgage rates. It is too soon to assume that the market will cool off in the coming months. Rocket Companies has its products spread out across different sectors, thus, reducing the risk associated with the housing market.
Hold RKT Stock
Rocket Companies is a company that is consistently growing and increasing its mortgage volume. I think the company has massive growth potential and an ability to expand in the coming years. It is new to the public, but the company has made strong moves and is expanding across all fronts. The IPO darling may have had a rough few months but it is not one you should write off easily.
Despite the risks, RKT stock will recover in the long term. This dip is the perfect chance to add it to the portfolio and enjoy returns in the long run.
I believe the stock has hit rock bottom and will only rise from here in the coming months. Add it to your portfolio now and hold for the long term. It will not trade at a discount forever. You might see volatility in the near term but the long term prospects look strong and positive.
On the date of publication, Vandita Jadeja 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.
Vandita Jadeja is a CPA and a freelance financial copywriter who loves to read and write about stocks. She believes in buying and holding for long term gains. Her knowledge of words and numbers helps her write clear stock analysis.
