In This Article:
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Rocket Companies (RKT) continues to fall, down 40% on the year.
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The mortgage loan industry is getting clobbered as interest rates rise, putting housing out of reach for many Americans.
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Analysts are lining up to downgrade RKT stock, sending a clear signal to investors.
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Down 40% year-to-date and sliding toward penny stock territory, shares of Rocket Companies (NYSE:RKT) have fizzled. The Detroit-based mortgage loan provider that performs electronic closings across the U.S. has seen its shares beaten badly over the past year. Owing to an overheated housing market, rising interest rates and poor financial performance, RKT stock has declined 60% over the past 12 months.
The stock is nearly 70% lower than its all-time high of $28.42. It reached that level in August 2020 shortly after its initial public offering (IPO). And with the share price continuing to slip lower, the question arises: What will it take to turn things around for Rocket Companies?
| Rocket Companies | $8.90 |
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Supporting the Home Team
In a show of support, chief executive Jay Farner bought 21,700 shares of RKT stock on April 25. It was his 11th purchase of the stock during the month of April and brings his stake in the company to 1.8 million shares worth nearly $17 million.
Typically, executives purchasing shares of the company they lead, known as “insider buying,” is seen as a vote of confidence. Outside investors often see management having skin in the game as favorable, and it can inspire others to also buy stock.
However, in the case of Rocket Companies, Jay Farner’s purchases throughout April did nothing to reverse the downward trajectory of RKT shares, which have declined 20% in the past four weeks. It appears the macroeconomic headwinds confronting the housing market and mortgage companies, combined with Rocket Companies’ financial performance, have been too much for investors and analysts to look past.
Despite record loan volumes in 2021, Rocket Companies’ net income for the year declined 35% on an annual basis to $12.9 billion. The company followed its last earnings report by announcing it is laying off 8% of its 26,000 employees, most of whom work in Detroit.
Macroeconomic Headwinds for RKT Stock
To be fair, Rocket Companies is facing a number of issues that are negatively impacting all mortgage companies right now. The average 30-year mortgage rate in the U.S. now sits at 5%, up from less than 3% a year ago.