In a report released yesterday, Mihir Bhatia from Bank of America Securities maintained a Hold rating on Rocket Companies (RKT – Research Report), with a price target of $14.00.
Mihir Bhatia has given his Hold rating due to a combination of factors surrounding Rocket Companies’ recent acquisition announcement. The company plans to acquire Mr. Cooper in a $9.4 billion all-stock deal, which is expected to bring about $500 million in annual revenue and cost synergies by 2027. While the acquisition is anticipated to be immediately accretive by 2025, the market reacted negatively with a 7% drop in RKT shares, reflecting concerns over Rocket’s strategy of using its stock for large mergers and acquisitions.
Bhatia acknowledges the potential benefits of the acquisition, such as increased revenue from title and escrow services and improved recapture rates, which could lead to mid-teens EPS accretion by 2026. However, he also highlights the execution risks associated with integrating two large companies, especially given the recent acquisition of Redfin. Despite these concerns, the operational overlap between Rocket and Mr. Cooper suggests some strategic alignment, warranting a Hold rating as investors await further clarity on the integration process.
RKT’s price has also changed moderately for the past six months – from $19.190 to $12.070, which is a -37.10% drop .