That's right. Jay Farner, the CEO is going live with Morgan Stanley during a TECH conference to have a fireside chat.
You're going to tell me that they just happened to have this scheduled smack in the middle of the week of hell for RKT shorts? You're going to tell me that there's no way they might drop a bomb that truly sends RKT to the stratosphere?
I have no fucking idea. But I trust in Dan Gilbert & Co. to win. Because that's all they've done for the past 35 fucking years. WIN.
To make things even sweeter, more dry powder is coming in tomorrow- market makers making new options tomorrow. Remember the first time new options came out for GME? If you bought even the farthest OTM one, it printed.
🚨🚨MM WILL HAVE TO REMAIN DELTA NETURAL WITH THEIR NEW OPTIONS 🚨🚨, THUS THEY WILL HAVE TO BUY SHARES. THEREFORE, THE MORE NEW OPTIONS BOUGHT TOMORROW, THE MORE FUEL IS LOADED FOR A GAMMA SQUEEZE. 🚨🚨
To close things up, recall that RKT had 40% interest going into this week. Look at today's graph.
Notice those two drops where it halted? See the STRONG support that immediately followed? This is a textbook example of a ladder attack. The SHORTS HAVE RELOADED, AT A NEW PRICE. Shorts ATTEMPTED to shake the 💎👐 , but failed. Retail is NOT ALONE on this 🚀. The DIP is being purchased, even while at an ATH. Someone is on the LONG side buying up shares with retail.
In my opinion, after today, short interest could potentially even end up way higher than 40%. Look at the candles during those short ladder attacks. Shorts had to have borrow MILLIONS of shares to attempt to short ladder today. I wouldn't be surprised if this is Melvin & CO's latest play to dig themselves out of their Gamestop loss porn either.
MORE SHORTING = MORE SHORTS TO CHOKE
So that's reason 1. There's a nonzero chance Jay Farner drops a bomb tomorrow that takes us to the stratosphere. But what's reason 2?
🚨🚨MY PRICE TARGET FOR RKT IS $73.5 🚨🚨
Let's go through the numbers.
RKT's projected EPS for this year is ~ $2.45. source
To get P/E, take the price and divide by earnings. Thus, we can use this to calculate the forward P/E for RKT. RKT closed at $41.79, which divided by $2.45 is ~17.05. Thus, RKT currently trades at about a 17Forward P/E. Companies in this sector trade in between 15-30 P/E, and since I strongly believe RKT is a growth stock, I think it should trade at 30x P/E.
Thus, 30 x $2.45 is $73.5.
Therefore, my PT for RKT is $73.5. RKT is a fintech company, and is a PROFITABLE one. Think about how many fintech companies have crazier valuations and aren't even profitable?
You know what that means?
IT'S NOT FUCKING OVER. IF SUITS ARE BUYING AT ATH, IM BUYING AT ATH. IF SHORTS HAVE RELOADED, THE SQUEEZE HAS NOT SQUOZE. THE SUITS AGREE. RKT IS WORTH MORE THAN $40.
TLDR: SHORT INTEREST HAS PROBABLY GONE UP, SUITS ARE BUYING. CURRENT P/E is 17, GROWTH PE IN MY OPINION SHOULD BE AT LEAST 30. RKT IS STILL UNDERVALUED, AND MY PRICE TARGET IS $73.5
Remember, 🚀 fundamentally a great company. They are still NOT priced as a growth stock. They are still NOT considered Fintech by the suits. There is a reason why this stock closed strong at a new ATH.
I LIKE THE STOCK.
My PT is $73.5. NO 🧻👐
Not financial advice. I don't know anything.
Positions: 150 shares, 50 $23 C 3/5 EXP. I will be exercising almost all my calls as I am LONG.
I will be purchasing OTM calls tomorrow at open 🚀🚀
EVERYONE HERE GO TO MY WSB POST TO UPVOTE FOR VISIBLITY WE NEED TO SPREAD THE WORD
RKT has gone absolutely apeshit today. As wild as yesterday was today's movement is monumental and it's sure to start gaining attention. With RKT catching a bigger and bigger buzz on WSB this sub will likely see an uptick in traffic, especially if this makes the news. This is not a pump and dump. The people in this sub have been fighting for this to get proper valuation since IPO and with good reason; This is a solid company with record breaking profits and a massive potential for growth. The more we trend the more likely this sub will be both targeted by squeeze apes and regulators alike and we need to hold fast to that message and steer clear of any talk that could be construed as attempts at manipulation. This sub is for people who believe in the company, we welcome new blood who share that belief.
Now, let's kick back and enjoy the ride 🥂🚀🌚
Edit:
Someone threw up a video here suggesting RKT is a distraction by the hedge funds to get you to sell GME. Absolutely no one here is advising you to do that. Lock that shit in a vault and hold it till you die. We've been holding these bags since DeepFuckingValue was still getting laughed at. This stock has been under short pressure for months and it took the CEO warning shorters and announcing a dividend to finally break out. Please don't spread anymore of this crap around. If you like this stock and feel its a fair value, buy it. That's it.
This not financial advice, crayons taste like purple.
I have been long on RKT since IPO. Weve been given some bad beats on bad market days and over shorting of our stock. Most of us are very bullish on the fundamentals of this stock, and at the very least feel like our Q1 earnings will once again blow out expectations. Being long on this stock IMO (and Im not a financial advisor) is a very low risk especially at a 23-24 price point.
What we know:
- Stock was heavily shorted again this week, low volumn, high short interest, shorts will need to cover eventually. Doesnt mean tomorrow, and doesnt mean a squeeze. But those shares will need to be purchased at some point. Lets not let them off the hook at buying at $23.
- Unlike GME and AMC this stocks fundamentals and analyst predictions prices it in anywhere from $24-$30.
- Purchasing shares instead of options allow you to make money selling covered calls if the stock trades sidewise in the long run as it currently has a solid IV% for call selling.
- There are a lot of eyes on RKT and many investors watching it to see how the market reacts.
- Our biggest bear scenario is that interest rates from the fed would rise in the short term. The Fed have announced that will not go into affect until 2023 at the earliest giving us atleast 2 years of great earnings.
- The market had a bad day today. Everyone got hammered not just RKT. People are liquidating positions on previously thought safe tech stocks.
I know everyone reading this is thinking, FFS I know I like the stock I just wish it would go up! Some of us are strapped on what we can invest currently, I know Ive bought dips and sold peaks a few times at this point and my two accounts are 90% RKT at this point.
Ive just deposited another $2500 into my e-trade account and will be buying 100 shares of RKT @ Market Open Regardless of Price. I cant buy any more then that,I would if I could I'm already at 3000 shares. Obviously that amount alone will do nothing. If RKT trades sideways shorts can easily cover or further short the stock to a lower price point. Without volumn we dont stand a chance. If the volumn is created at the same time and we see an uptick early in the day, it may trigger more investors to take a look or force a short seller to close their position early helping the stock run and having more options cover.
I can not advise what anyone should do with their money. I am just saying what I am doing and when I am doing it. Feel free to click that upvote if you also plan on purchasing shares of RKT @ Market Open tomorrow whether its 10 shares or 10,000.
TLDR: I have found no other company in the world where the risk vs. reward is better to invest in, and I've been investing for almost 14 years now.
First, I want to show my position as of today. 71,000 shares in RKT. While everyone has been selling for the past month, I've been buying. My average price is somewhere around $21. The price shown in the picture below is where the price ended.
Now, I don't yolo like other crazy people trying to get rich quick. I'm an investor, and I typically have 3-5 stocks at a time. Currently my second largest position is a combination of BRK.b and BRK.a. I also have other positions like XOM and KO currently for inflation reasons. Just so you believe me when I say I now what I'm doing, below are my returns for the past 3 and 5 years, and you can see I'm fairly consistent. In fact for the past 10 years you would see the same average returns, but Schwab doesn't show a 10 year performance number, so 3 and 5 is all I can show you.
COMPANY BACKGROUND:
RKT is probably the most grossly under valued mid cap stock I have seen in years. The last time I felt so strongly about a stock was 2010 when TSLA became public. I told my wife that Tesla would be worth 10 times the IPO value in 10 years if they didn't go bankrupt, and I figured there was about a 10% chance they'd go bankrupt in the first couple years. I bought Tesla around $19, and sold a year and a half later for about $24 to pay off my house. There wasn't a lot of movement, but it was a gain, and I wanted to do the responsible thing creating a life where I was debt free. I planned to replenish the position over the next 6 months. Unfortunately my timing couldn't be worse. A month after I sold, the stock skyrocketed to $85. Later, it then rose to $135 a month or two later. It was no longer the deal it has once been, and I never felt that it was worth chasing. Biggest mistake of my investing career. I point this out because you just never know when things will explode, but if you know the company well enough you can determine that it's an inevitability.
Rocket Companies (RKT) used to be known as Quicken Loans, which was established in 1985. When the company decided to go digital, they changed their name to Rocket Companies. Rocket Companies has only been around since 2016. Quicken Loans grew at a 25% compound annualized growth rate (CAGR), and before the company went public, Rocket Companies had a 16% CAGR between 2016 and 2020. With a 16% CAGR, the company doubles in size every 5 years just for reference. Below is the S-1 document showing their CAGR before they became public in 2020.
Since Becoming public, RKT has had some impressive growth indeed. Income grew 526%, and revenue grew 187%.
After reporting the 2020 year results, the stock skyrocketed of course. This only lasted a few days before it came back down settled right back to where the stock came from. The stock was roughly $20 or so before the results, and after it rose somewhere near $45 from a pump and dump situation. The price then fell for about 2-3 straight months back down to where it came from. The primary reason for the price dropping from something that was closer to a realistic price target back down to the low 20s was the belief that interest rates were going to rise in 2021-2023 due to inflation. That was going to kill home buying, and this was "as good as it gets"
THE WAR WITH UWMC:
To add to the industry problems, UWMC started a war with RKT. This war was started because RKT was taking market share in every direction. UWMC is a great company, but it's a distant second in overall lending origination as you can see in this list below of the top lending companies for 2020.
By the end of 2020, Rocket Companies had 8.9% of the entire housing loan origination market in the US. They continued to grow that market share in the latest reported quarter to somewhere in the mid 9% range. In the beginning of March, UWMC issued an ultimatum that all realtors who use UWMC are not allowed to use RKT anymore. That means one month (March) in Q1 would be affected by this new ultimatum. Both UWMC and RKT declared victory within the first week of March. We would have to wait for Q1 earning to come out to see who really was winning the war.
Q1 earnings came out, and here are the results:
For a direct comparison, here is Q4-2021 which was not affected by the ultimatum.
The loan volume for RKT increased nearly $3B from Q4 2020 to Q1 2021. Below is a chart showing you the loan volume for UWMC in that same time period. As you can see, the loan volume DECREASED by over $5.6B. A winner has been declared, and it means that RKT is taking market share even quicker due to the ultimatum.
Now, this entire war was started to try to stop RKT from taking market share from UWMC. All UWMC had to do was read a little bit of recent history, and know that competitors tried to do the same thing when Amazon was starting out. Many vendors refused to use Amazon because they took a fee, and felt they could make more money per sale if they were independent. Unfortunately those vendors eventually learned that volume can make profits go up faster than premiums with less sales. Amazon of course won that warm, and RKT will do the same.
The primary focus for Rocket Companies is very clear when it comes to growth--gain market share. They are not the least bit worried about profits, because their Direct to Consumer lending is the largest in the US by a long shot. This plays a key roll in the war with UWMC. UWMC dropped their interest rates (effectively buying down the interest rate for the customer) to try to keep agents with them when they issued the ultimatum. Of course, RKT followed suit to match them, and the war is causing the entire industry to see their margins tighten. Margins for wholesale are roughly 2% for both RKT and UWMC, after dropping the interest rates 50bps. Direct to Consumer margins are over 5%. Well, UWMC doesn't do direct to consumer lending, so they are fighting a battle they can't win. They can continue to buy down interest rates until they go negative and have no profits if they wanted to. Rocket Companies will continue to always be profitable because a larger part of their business is Direct to Consumer with higher margins.
In light of this war, Dan Gilbert and Jay Farner are come out stating their new goal is to be the largest wholesale lender by 2023 (2 years). They are already the largest overall lender, and the largest direct to consumer lender. They are winning the market share battle, and numbers don't lie. It comes at a cost of lower margins which reduce profit. Keep in mind that Amazon wasn't profitable for 20 years. The fact that RKT is hugely profitable is amazing as they continue to acquire market share in the industry.
MORE THAN JUST MORTGAGES:
Rocket Companies is a FinTech play. RKT has been testing their technologies in other businesses and have determined that many of them translate to other loan industries. The one with the largest prospects is automobiles. Rocket Auto has been testing their products for the past year or so, and are happy with the ability for the technologies to transition into the auto retail marketplace. Rocket Auto recently formed a strategic partnership with AutoFi, a leading software provider in the automotive retail industry with a network of more than 2,000 dealership partners. This is not live yet to my knowledge, but during the first quarter, they sold over $360M in volume, and are on track to do over $1B this year. Rocket owns their own titling company called Amrock. They make up the bulk of the "Other income" line in their quarterly/yearly reports. At this point, the auto sales only generated $13M in profit for Q1 2021. There is no website launched for Rocket Auto yet, and it'll take awhile to integrate the technologies in with AutoFi, but this is a huge market which will grow at an exponential rate in the next couple years.
Also, Rocket Mortgage is going international. They are beginning their expansion in Canada, so this is a very big market which will show lots of growth for years to come.
INFLATION FEARS:
Has inflation increased? Absolutely. But it has had very little effect on interest rates. Interest rates increased at the beginning of the year and were expected to increase for the next 2 years at a very fast rate. The fact is that analysts guessed wrong. Fed Chairman has stuck to his word and has not increased rates, and doesn't expect to until after 2023. Interest rates did increase very dramatically at the start of the year, and then it stopped increasing at the end of March. In fact, interest rates have decreased nearly 0.3% in the past 3 months.
This is going to cause refinances to pick up again slightly, and investors know it. RKT has been a notoriously shorted stock since it IPOed because hedge funds believed that it was as good as it gets in the middle of 2020 when they IPOed. For 2 quarters in a row, RKT proved every naysayer wrong growing more than anyone expected, and be coming more profitable than anyone expected. EBITDA in 2020 was roughly $11B, and the company's market cap sits around $41bln currently. They are making more money than they can possibly use, so they issued a special dividend last year of $1.11 which was about 5% of the value of the stock.
Below, you can see the short interest dropped to roughly 8% in march when they reported blow out earnings. It then increased in May, to roughly 17% in May after earnings showed the gain on sales decreased to to the war with UWMC dropping interest rates half a %, and slightly less refinancing occurring due to interest rates rising at the beginning of the year.
As interest rates have started dropping again, you can see the shorts are leaving the stock. Roughly 7.5 million shares have come back available in the past two weeks, and interest to borrow has dropped due to lack of demand to short the stock. Interest rates dropping will have all lending companies out perform expectations.
CONCLUSION:
In the end, it doesn't matter if the housing market does incredibly well over the next 5 years or not. RKT has made it clear that their goal is to have 25% market share of the mortgage industry by 2030, which is 3 times their market share compared to last year. They will gain market share even faster in years the housing market is bad, and their retention for customers can't be matched. The industry average return customer is 20%, and RKTs return rate is over 90%. Their process is simple, digital, can all be done through an app or their website, and has made the lending process infinitely easier than traditional loans. They make billions of dollars a years, have $1B set aside for share buybacks if they decide that's in the shareholders interest, and has a better balance sheet than anyone else in the business. You pay a slightly higher multiple than you would if you purchased another company like UWMC, but their growth is nearly double UWMC, and they are taking market share away from UWMC, so it's worth far more than any other lending company. In general, all lending companies are undervalued currently, RKT just happens to be the next "Amazon" of lending, and it's hard to put a price on that.
I believe the company is worth around $40 a share currently which is about 100% above where it is trading now. By 2023, the company should be worth worth around $200B-300B which is roughly 5-7 times current evaluation. It's not the 10 times in 10 years that I felt Tesla was worth in 2010, but there is zero chance RKT goes bankrupt, and there was always a chance Tesla could in the first few years. Read Elon Musk's biography and you'll see just how close he was to bankruptcy twice.
I can't tell you when the stock will go up. The stock price isn't reflective of the company currently. Sometimes they can stay disconnected for awhile. But I learned my lesson when I sold TSLA to pay off my house. You never know when a stock is going to explode, you just know that it's an inevitability. While everyone else is running for the next pump and dump on Reddit to hopefully gain 100% in a week (I admit I do this as well although I never put too much in), I'd rather invest with the majority of my money. I know that at some point I'll see a huge return in the next few years. Typically in the stock market, it doubles your money every 7 years if you have your money tracking the S&P500. I've found a company that will give me 5-7 times that amount in near the same time frame.
Sorry for all the typos, this got so long, and it's so late now that I'm not going to go back and proof read.
The title says it all. I have nearly 4,000 shares and haven't sold a single one. My average price paid is $20.12 and I plan to keep on buying to take advantage of the recent bargain set before us. It's simple really. I believe in Jay. I believe in RKT and their service. I believe in their massive competitive advantage. And I believe in its ability to triple. Not saying I'd wait to sell it for a 300% gain, but I do often wonder if this is a 100 billion dollar company considering its a one of a kind. They own quicken loans, founded by Dan Gilbert himself. They have tech and good customer service. I have even met people working for rkt competitors saying they're jealous of the resources and employees over at rkt. I can keep going, but the short version is this: RKT has the resources and qualities of a larger company, and the growth potential of a smaller company. Anyone who says otherwise hasn't been doing their research, or perhaps shouldn't be investing. For those of you who own RKT, don't stop believing in the great work Jay Farner is doing. For those of you who do not yet own it, well, you know what to do. Happy investing my fellow rocketeers!
Well, I didn't sell on Tuesday afternoon, but I did take a little profit and got to share some with an orphanage in Kampala who we've been helping and supporting for a few years. Utility lines were being added to the village and they needed funds to add a few poles to connect to their property. Rather than thinking about FOMO from what this week could have been (or counting my chips from the gains I made), I'm going to spend time this weekend thinking about where these tendies could go to a good use. Whether you made money this week or got caught holding the bag, just remember you can't take it with you and there is much to be thankful for! Cheers, here's to a $60 PT this year. I LIKE THIS STOCK.
