Morgan Stanley's recent upgrade of Rocket Companies reflects a strategic outlook on the mortgage loan sector, particularly as interest rates are expected to rise further. Analyst Jeffrey Adelson noted that Rocket's stock typically outperforms the market following periods of peak negativity around higher rates.
The firm raised its price target for Rocket shares from $18 to $19, suggesting a potential upside of approximately 30% from the stock's closing price.
Despite a nearly 25% decline in Rocket's shares year-to-date, driven by increased volatility in the mortgage market and rising mortgage rates, Morgan Stanley believes that the company's historical performance indicates strong earnings growth potential in the coming year.
The Mortgage Bankers Association reported that mortgage rates recently reached their highest levels since August 2025, leading to a decrease in homebuyer loan requests.
However, Morgan Stanley's analysis suggests that Rocket Companies could benefit from favorable conditions when rates peak, as evidenced by its past performance where the stock has outpaced broader market gains following similar rate peaks.
This perspective contrasts with the broader consensus on Wall Street, where a significant number of analysts maintain hold ratings on the stock, indicating a divergence in market sentiment regarding Rocket's future prospects