Key points
- A mix of reduced housing inventory and more flexible mortgage rates is poised to lighten up kerosene-filled stocks like Rocket Companies.
- Projections of explosive growth could become a reality in coming months as markets bet on them alongside options traders.
- Certainty is present in the upward movement and macroeconomic trends support the thesis.
- 5 stocks we like better than Rocket Companies
Most Wall Street investors can tell you that the ideal time to get away from the office and “live a little” is when the VIX is low, and stocks are not. ready to move as fast. However, veterans will correct this lesson and tell you that quiet times in the VIX are where you need to perfect a great strategy to make money once volatility sets in.
If you stay prepared, you don’t have to prepare. Today you can prepare by identifying some of the final branches that will benefit from Buffett’s latest investment in real estate sector, particularly among home builders. Now that both housing stocks are poised to rise, just as the FED is proposing rate cuts through 2024, only one stock should enter your crosshairs.
This stock is Rocket Companies NYSE:RKT. Think about it: lower mortgage rates combined with a sudden infusion of new housing inventory can cause a group of buyers to emerge and sweep the lists. However, this likely won’t happen if companies like Rocket aren’t ready to provide these mortgages and other financing solutions!
This is the situation
Following the Vanguard Real Estate ETF NYSEARCA: VNQnotably his performance against the Selected Technology Sector SPDR Funds NYSEARCA: XLKwill give you a better look at what’s currently about to happen to companies like Rocket.
Since the start of the year, the two charts seem to be moving further apart. Numbers first, the technology sector outperformed real estate up to 49.6% during the period. What does that mean?
Buffett decided to enter the ground zero of new real estate wave for the same reason, options traders decided to jump into Rocket stock calls.
As a reminder, a call option is a way of betting on the Upside down of an underlying stock as a form of leverage. Since options cost a fraction of the cost of purchasing actual stocks, you can generate high returns in a short period of time.
This only happens IF you get the direction and timing right, which means getting either one wrong can also instantly wipe out your entire position. Knowing that MarketBeat’s scanner for unusual shopping options volume captured recently by Rocket Stock, it’s a safe bet that traders are feeling confident in an upcoming upward movement.
Of course, there is fundamental reasoning behind these trades, and breaking them down can help you better evaluate the followability of this stock’s potential outcome.
Is this real?
For the markets, this is the case, especially judging by Price Action in stock so far. Although real estate has been flat (according to the ETF) this year, Rocket has still soared to 98.0% of its 52-week high prices, meaning markets are bullish on this name. Will they continue to be? Don’t fight the trend.
But there are other ways the market is placing its confidence in this stock for the months to come. You see, the forward price-to-earnings ratio is the market’s preferred way to gauge a stock’s future earnings potential, and as these multiples increase, the best.
A higher forward P/E means that markets are willing to pay more today for a stock’s future earnings, which can translate into lower earnings. excited about something. With Rocket, markets might be excited as analysts expect a 425.0% upside. jump in EPS coming in the next twelve months.
Due to this projection and the logical understanding that mortgage activity is about to explodeIt’s no surprise that the stock trades at a forward P/E of 37.8x, which is 36.0% higher than the industry’s average multiple of 27.8x.
But how can the markets be so confident about this future growth? After all, 425.0% EPS growth is pretty obscene. The company’s investor in the third quarter of 2023 presentation can paint a better picture for you.
With a customer retention rate of over 90.0%, you can expect that not only regular customers, but also new ones, will come seeking services once the peer pressure of purchasing ‘a house will be established.
Of course, nothing is guaranteed, even in a market facing possible rate cuts from the FED, but often one plus one equals two. In Rocket’s case, the markets say it’s one, and Buffett says the real estate sector is the other; perhaps a potential investment here can equal both for your wallet.
Before you consider Rocket Companies, you’ll want to hear this.
MarketBeat tracks Wall Street’s top-rated and top-performing research analysts daily and the stocks they recommend to their clients. MarketBeat identified the five actions that top analysts are quietly whispering to their clients to buy now before the broader market tanks…and Rocket Companies wasn’t on the list.
While Rocket Companies currently enjoys a “Reduce” rating among analysts, top-rated analysts believe these five stocks are Better Buys.
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