What happens to stocks if AI loses momentum?
On Monday, Keefe, Bruyette & Woods analyst Bose George revised the price target for Rocket Companies Inc . (NYSE:RKT) shares, lowering it to $13 from the previous $15, while keeping a Market Perform rating on the stock. The adjustment follows the company’s guidance for the second quarter, which led to a revision of earnings per share (EPS) estimates for the years 2025, 2026, and 2027. The new EPS forecasts have been set at $0.31, $0.80, and $1.14 respectively, a decrease from the earlier projections of $0.42, $0.92, and $1.38.
The reduction in the price target and EPS estimates comes despite Rocket Companies reporting solid results for the first quarter. The analyst noted that the near-term operating environment for the company appears somewhat uncertain, prompting a more conservative outlook. This new perspective incorporates the second-quarter guidance, anticipated lower forward margins, and slightly increased runrate expenses. With a beta of 2.34 and high price volatility, as highlighted by InvestingPro’s analysis, investors should note that the stock tends to experience significant price movements relative to the broader market.
Despite the lowered expectations, the firm expressed a positive view on Rocket Companies’ pending acquisitions of RDFN and COOP. Keefe, Bruyette & Woods believes that these acquisitions will contribute to the company’s success in the long run, positioning Rocket Companies as a potential long-term leader in its industry.
The new price target of $13 is based on a 12 times multiple of the firm’s estimated 2027 earnings, which has been discounted back by nine months. This valuation reflects both the updated earnings forecast and the current market conditions as interpreted by the analysts at Keefe, Bruyette & Woods. The Market Perform rating indicates that the firm does not foresee the stock outperforming the broader market in the near future but also does not expect it to significantly underperform.
In other recent news, Rocket Companies Inc. reported its first-quarter 2025 financial results, meeting analysts’ expectations with an adjusted earnings per share (EPS) of $0.04 and revenues reaching $1.3 billion, surpassing the forecast of $1.25 billion. The company also announced strategic acquisitions of Redfin (NASDAQ:RDFN) and Mr. Cooper, highlighting its focus on expanding its integrated homeownership platform. Despite these positive developments, Rocket Companies’ stock experienced a 1.29% decline in after-hours trading. Analysts from firms like Goldman Sachs and Deutsche Bank (ETR:DBKGn) have shown interest in the company’s subservicing strategy and its impact on market share. Rocket Companies’ CEO, Varun Krishna, emphasized the transformative potential of AI in enhancing productivity and driving growth. The company is also expecting adjusted revenue for the second quarter of 2025 to be between $1.175 billion and $1.325 billion. Rocket Companies has been proactive in addressing market volatility and consumer sentiment shifts, with plans to decrease marketing expenses by $100 million in the second half of the year.
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