Shares of Rocket Companies surged more than 70% on Tuesday, in a dramatic eye-popping move on no apparent news. Analysts say the surge is similar to GameStop and other so-called meme stocks that soared earlier this year.
Rocket, the parent company of Quicken Loans, closed at $41.60 after being halted several times for volatility. More than 367 million shares changed hands in the stock’s busiest trading day ever.
“We believe the trading reflects retail/Reddit activity like we’ve seen in other stocks recently,” wrote Wells Fargo analyst Donald Fandetti on Tuesday. “We noted our incrementally more positive view, but not good enough to support this move which is the third trading day after earnings. We expect the shares to normalize and again trade on fundamentals, however the timing is uncertain.”
Last month, some retail investors on Reddit reportedly pushed shares of the brick-and-mortar video game retailer, GameStop, up by more than 1,500% within two weeks, inflicting terrible pain on short selling hedge funds.
“These men and women are back and they’re into this one in a big way,” said Najarian, co-founder of Market Rebellion who has call positions in Rocket Companies and put positions in GameStop.
Rocket companies shares are heavily shorted, leaving them vulnerable to a phenomenon known as a short squeeze, where investors betting against a company’s shares are forced to unwind their positions after a rally in the stock price, according to Reuters.
The Detroit-based online mortgage provider reported “record-breaking” earnings on Thursday for the fourth quarter of 2020, against Wall Street analysts expectations.
“Rocket Companies’ record-breaking fourth quarter and full year 2020 results demonstrate the sheer power of the technology platform we have built and refined for more than two decades,” Rocket Vice Chairman and CEO Jay Farner said in a news release.
“In the midst of a pandemic, we successfully drove growth in every segment of our business, while never losing focus on meeting the needs of our team members, clients and communities,” Farner added.
While Rocket has been growing quickly, some experts have warned that the U.S. housing market could experience a slowdown later in 2021, even as low interest rates fuel refinancings.