Mortgage specialist Rocket Companies (NYSE:RKT) has faced a challenging market environment in 2022 so far. However, a fresh upgrade from one Wells Fargo analyst is spurring traders to send RKT stock higher today.
Sure, real estate prices are generally higher than they were a year or two ago. A hot housing market could benefit Rocket Companies, at least in theory. But on the other hand, the real estate market may be rolling over as the Federal Reserve aggressively hikes interest rates.
On top of that, some first-time home buyers are undoubtedly priced out of the market due to inflation. Hence, it’s understandable for Wells Fargo analysts to acknowledge the “tough mortgage backdrop” when covering RKT stock.
Could those same analysts envision 20% upside for the stock? Well, Wells Fargo analysts did just upgrade Rocket Companies from “market perform” to “overweight.” In the world of finance, being “overweight” is great for one’s financial health.
What’s Happening With RKT Stock?
This upgrade couldn’t have come at a better time for Rocket Companies’ struggling investors. RKT stock has been heading toward a crash landing over the past year, falling from a 52-week high of around $19 to just $8 and change.
With that, however, Rocket’s trailing 12-month price-to-earnings (P/E) ratio has declined to an enticing 4.6. Could there be a potential buying opportunity here? Wells Fargo analyst Donald Fandetti seems to think so. Fandetti sees negative sentiment peaking as well as margins starting to stabilize and even grow.
Anticipating that Rocket Companies could benefit from “dislocation” in the residential-mortgage market, Fandetti foresees a “better risk/reward” for RKT stock. With that, he raised his 2023 earnings per share (EPS) estimate for Rocket Companies from 65 cents to 75 cents. Moreover, the analyst expects Rocket’s market share to reach 6.7% in 2023.
If these predictions pan out, there just might be a turnaround moment — and even a rocket ride to the upside — for RKT stock in the coming year.
On the date of publication, David Moadel did not hold (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.