World Rocket Companies share price jump: is Rocket Companies the new GameStop?

13:31  03 march  2021
13:31  03 march  2021 Source:   finanzen.net

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After the GameStop hype, another heavily shorted stock has risen massively in the past few days. Does the WallStreetBets movement have a new favorite?

Mario Vedder/Getty Images © Provided by Finanz.net Mario Vedder / Getty Images

• Rocket Companies share rises massively

• Strong short interest in Rocket Companies share

• Do the markets see GameStop 2.0?

The WallStreetBets movement, a group of retail investors who joined forces on a Reddit sub-forum to buy heavily short stocks from hedge funds and force a short squeeze, caused turmoil in the financial markets in January. With concerted purchases, they have caught short sellers on the wrong foot and sometimes even put them in financial distress.

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The movement quickly spread to a number of other stocks where hedge funds had been betting on falling prices: AMC Entertainment or Nokia were just a few of the cheap stocks that got a stock market hype within a short period of time.

Massive price jump also at Rocket Companies

In the last few days events seem to be repeating themselves: With Rocket Companies , another stock that had previously been in a sideways movement at a low level for months, suddenly showed massive price fluctuations. Within just a few trading days, the company's share price has doubled, and since Friday the price on the NYSE has been around 110 percent. In Tuesday trading alone, Rocket Companies stocks rose 71.19 percent to $ 41.60 after hovering around the $ 20 mark for months.

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Rocket Companies: GameStop 2.0?

observers were immediately compelled to draw parallels with the GameStop hype. Indeed, there are obvious similarities between the two shares.

Like GameStop, Rocket Companies is a stock that is being sold heavily short. According to FactSet, around 40 percent of available stocks have been sold short, catapulting the company high on the list of US companies in terms of the size of hedge funds' short bets. In view of the significant price jump - as in the case of GameStop - short sellers could now be forced to stock up on Rocket Companies shares in order to limit their losses, which should additionally fuel the price development.

And another parallel to GameStop can be seen: Apparently Rocket Companies has moved into the focus of the WallStreetBets movement, because in the Reddit sub-forum there were numerous mentions of the title and also on Twitter the share certificate was discussed much more often than before .

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"We believe trading in the stocks reflects Reddit activity as we've seen other stocks recently," CNBC quoted Donald Fandetti, an analyst at Wells Fargo . However, the expert does not expect the share price development to continue over the long term: "We are assuming that the shares will normalize and trade on fundamentals again, but the timing is uncertain".

Not entirely without price-moving news

Unlike GameStop, however, the Rocket Companies recently had positive corporate news that could at least partially explain the bullish investor sentiment: The online mortgage provider recently reported surprisingly strong quarterly figures. Business development in the fourth quarter was significantly better than expected on the market: The company, which only went public in August 2020 and made a rather subdued stock market debut, had sales of 4.775 billion US dollars in the fourth quarter, significantly more, than analysts expected. The Rocket Companies earnings per share were also well above analyst estimates at $ 1.14 for the reporting period. At 107.2 billion US dollars, the financed new business was just as better than expected.

The price jump of the past few days can only be partially explained by the positive business figures, experts believe in view of the parallels to the GameStop events.

editors finanzen.net

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