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Investing.com - Morgan Stanley has resumed coverage of Rocket Cos Inc. (NYSE:RKT) with an Equalweight rating and a $16.00 price target. The company, now valued at $41.29 billion, has seen its stock surge 84% year-to-date, according to InvestingPro data.
The firm believes the risk-reward profile for Rocket is less compelling following a 50% rally in shares since the company’s deal announcement on March 31.
Morgan Stanley notes that Rocket shares now trade at approximately 17 times the firm’s 2027 estimated pro forma earnings per share of $1.13, representing a 140% premium compared to peers in the mortgage originator group.
While acknowledging Rocket’s strategic acquisitions, Morgan Stanley cites three key concerns: elevated market expectations at the current valuation, operational risks from integrating two acquisitions simultaneously, and ongoing challenges in the mortgage and housing market.
The investment bank has historically recognized Rocket’s premium valuation due to its leading position, technology platform, and sensitivity to refinancing cycles, but points out that the current premium is at its widest level in 4.5 years.
In other recent news, Rocket Companies reported second-quarter 2025 earnings that surpassed expectations. The company posted an earnings per share (EPS) of $0.04, exceeding the analysts’ forecast of $0.03, and reported revenue of $1.36 billion, beating the projected $1.28 billion. In addition, Keefe, Bruyette & Woods raised its price target for Rocket Companies to $15.00 from $14.00 while maintaining a Market Perform rating. The firm adjusted its earnings estimates for the coming years, forecasting an EPS of $0.11 for 2025, $0.70 for 2026, and $0.97 for 2027. Meanwhile, Citron Research stated that Rocket Companies is not a meme stock, highlighting its role in a $13 trillion mortgage sector. Rocket Companies also appointed Viral Nation as its social media agency of record to enhance its presence across digital platforms. Additionally, a recent rally in homebuilder and mortgage stocks, including Rocket Companies, followed weaker-than-expected jobs data and expectations for Federal Reserve interest rate cuts.
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