Rocket (RKT): Share gainer in a cyclical market that cant get much worse

Rocket is a capital light, technology driven, mortgage lending business that has consistently gained share to become the largest retail mortgage lender in the US. The end market is highly cyclical, but Rocket has a scalable, technology-driven solution that the rest of the industry struggles to replicate.

We think that Rocket is well placed to accelerate market-share gains in the current down market.

• Smaller non-bank operators are being pushed out of the channel, plus banks are scaling back their mortgage businesses. Basel III could accelerate this.

• ~30-35%  of people employed by the industry have exited, and remaining loan officer pay has fallen ~50%.
  

We see very limited cyclical downside to mortgage volumes. They are somewhere around a bottom.

• We see mortgage volumes picking up slowly initially with first few Fed cuts but refi volume will grow exponentially over the next ~3years if mortgage rates follow the ~200bps in the FED dot plot.
  

• The boom years not coming back. Even if mortgage rates fall to 5%:  only ~21% of mortgages will be eligible for refi.

We see RKT earning $1.10 EPS in 2026-2027 period in our upside scenario. (vs. 2026 consensus est of $0.82)

• Based on our estimated normalised / mid cycle annual mortgage origination volume of $2.45tn in the 2026-27 period.

Potential Upside:     $19.50 (+40%)

Sensible Downside:  $11.38 (-18%)

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