Buy Rating on Rocket Companies: Superior Brand, Scale, and Recapture Offset Mortgage Sector Headwinds

Analyst Mihir Bhatia of Bank of America Securities reiterated a Buy rating on Rocket Companies, boosting the price target to $25.00.

Mihir Bhatia has given his Buy rating due to a combination of factors that, in his view, position Rocket Companies favorably despite near-term headwinds in the mortgage sector. He acknowledges investor concerns stemming from weaker results at a peer, particularly around faster prepayment speeds and intensifying competition in originations, but argues that Rocket’s strong national brand and reputation as a best‑in‑class lender should allow it to manage these pressures better than many rivals. Bhatia highlights Rocket’s historically higher recapture rates, which help offset the negative impact of elevated prepayments on servicing income, and notes that the company’s larger, higher‑margin consumer-direct channel differentiates it from peers more reliant on lower‑margin correspondent business.

At the same time, Bhatia recognizes that excess industry capacity is likely to keep a lid on gain‑on‑sale margin expansion, and his model conservatively assumes only modest margin improvement over the next two years, with further compression viewed as a key risk. He also points out that prepayment-driven runoff in mortgage servicing rights will likely pressure servicing revenue, especially given Rocket’s increased exposure following the Mr. Cooper acquisition, though that deal also boosts the potential to recapture more customers as loans refinance or churn. Overall, Bhatia believes that Rocket’s scale, mix of business, and superior recapture capabilities provide resilience relative to peers, supporting a favorable risk‑reward profile and justifying his Buy rating and $25 price objective despite the current volatility in the stock and the broader mortgage market.

In another report released on January 19, TipRanks – Google also upgraded the stock to a Buy with a $26.00 price target.