The mortgage company's buys of listings giant Redfin and loan-servicer Mr. Cooper, plus some AI, have grown its reach and diversified its business. By Dan Victor
An anemic housing market held back by stubbornly high interest rates and economic uncertainties hasn't stopped Rocket Companies.
The Detroit-based mortgage company continues to gain market share in a notoriously fragmented industry. A digital-first approach led by artificial-intelligence powered automation helped Rocket handle 5.5% of all home-purchase loans in the U.S. last year, up from 3.8% in 2024.
The company may just be getting started. Rocket sees a path to command an 8% share of the purchase market, and to significantly expand its reach for refinancing activity to 20% of that market, by 2027.
Strong growth and accelerating earnings should be positive for the stock. Trading at just 16 times earnings, compared with the trailing three-year average closer to 30 times, Rocket shares offer a compelling buying opportunity. The entry point presents a bargain, with the stock down 26% since the start of the year.
Deutsche Bank's Mark DeVries is one Wall Street analyst who is bullish, reiterating a Buy rating on the stock in March. In a recent report, he highlights an increasing likelihood that Rocket will continue to capture market share and deliver more efficiency improvements through its AI tools. DeVries says Rocket is an attractive way to play the housing recovery. He has a $24 price target for the next 12 months, nearly 70% higher than Wednesday's close of $14.43.
In our view, the opportunity for investors today is more than just a bet that interest rates thaw and housing picks up. Beyond the core lending business, Rocket's strategic stock-based acquisitions last year of the real estate marketplace Redfin and the loan-servicing giant Mr. Cooper have significantly expanded its market reach and diversified the business. The combined company now controls a mortgage flywheel that can keep its customers through the home purchasing process, from the initial property search through the life of the loan.
Recent financials underscore this strength. In its fourth quarter results, Rocket's adjusted revenue more than doubled, climbing 106% year over year to $2.4 billion, reflecting the impact of its acquisitions and an uptick in refinancing activity. Earnings per share of $0.11 surged from $0.04 in the prior year quarter. A performance metric that stood out was Rocket's "gain on sale margin," a yardstick for how much profit it makes on each loan it sells into the secondary market. The number reached 3.2%, the highest level for a fourth quarter in four years. Management credits its Rocket Logic AI platform for the improvement. The platform has allowed it to achieve volumes comparable to the first quarter of 2022 with just half the head count.
The addition of Redfin brings in 50 million monthly active users of its home listings platform, with the ability to funnel those serious buyers directly to its mortgage products before they consult other lenders. Rocket mortgage products are now offered through Redfin lead agents tasked with extending specialized bundling discounts. In fact, Rocket notes that the mortgage "attach rate" for Redfin clients -- the percentage of home buyers who also finance through Rocket -- is on track to surpass 50%. That level dwarfs typical industry benchmarks of around 15%.
The result is a fundamentally improved unit economics with less need for costly marketing campaigns.
For example, Rocket Companies in February announced a partnership with Compass International, the largest residential real estate brokerage in the U.S. This makes Redfin its preferred listings database while its agents promote Rocket mortgages. Through Compass' focus on premium properties with an average selling price of more than $1 million, Rocket gains greater visibility into the luxury real estate segment. That should increase its production of high-value jumbo loans compared with its traditional mass-market and entry-level buyer focus.
If Redfin is the top of the funnel, Mr. Cooper is the key to holding those client relationships over the life of the loan decades out. By acquiring the nation's largest loan-servicer, Rocket now receives a fee for processing monthly payments and handling administrative tasks on one in every six mortgages in America, or nearly 10 million homeowners. This portfolio generates approximately $5 billion in annualized recurring cash flow and represents a data gold mine as Rocket's AI capabilities identify customers eligible for refinancing products or new loans down the line.
What we've seen is a transformation in the company's profile where its bottom line is less dependent on the next move in interest rates. Naturally, a sharp drop in mortgage rates would be a boon for the business, yet Rocket can thrive even if rates just stabilize. That's the message from Rocket CFO Brian Brown describing a surge of refinancing activity. "We have reached a tipping point," he said in February. "For the first time in this cycle, the cohort of mortgages with rates at or above 6% now exceeds those below 3%."
Even as the market focuses on the uncertainties surrounding the war in the Middle East and its impact on inflation expectations, the latest average 30-year fixed mortgage rate of 6.4% remains below the highs of above 7.5% in 2023. A large segment of homeowners are eligible for refinancing -- a trend Rocket aims to capitalize on going forward. For 2026, the company expects the tailwind to drive "meaningful sequential growth."
That's not to dismiss the risk of interest rates rising or a "high-for-longer" scenario. A deeper freeze in the housing market or major economic slowdown would pressure Rocket's growth and earnings trend. Investors will want to follow the company's gain on sale margin as a sign its underwriting model is successfully navigating a shifting lending backdrop. Similarly, signs of the company losing market share would undermine any bullish thesis.
Still, there are plenty of reasons to turn constructive. The steep drop in the stock in recent months may have already baked in some of those uncertainties, evident by a valuation at a historically cheap multiple. Whether the refinancing wave has paused or pushed out a few quarters, investors can buy into the category leader ahead of what could be a tsunami. Rocket Companies is one stock worth strapping into.
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April 03, 2026 21:30 ET (01:30 GMT)
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