Now HMI measures builders' opinion on the relative level of current and future single-family home sales, with a reading of above 50 indicating a favorable outlook on home sales. housing market has continued, with the National Association of Home Builders Housing Market Index ("HMI") latest reading of 84 being up 1 point from last month's 83. The competitionįirst, providing a glimpse on the industry, despite the second wave of COVID-19 cases, the resilience of the U.S. As a matter of fact, in less than a month since launching, Rocket " had tens of thousands of consumers visiting the directory and clicking through to contact a broker".Īt this stage, for those interested to invest, it becomes important to identify any competitive threats. Subsequently, that directory was promoted with a Super Bowl advert, generating tremendous interest. Strikingly, profitability has been strongest during the last three quarters when EBITDA margins averaged 67%, in an environment characterized by reduction in the use of paper.Īlso, the growth should continue as in late January, the company launched a directory of nearly every broker in the country on. Thus, the business has generated sales using relatively lower operating costs, signifying substantial operating leverage. Looking at the bottom-line, Rocket's platform is highly efficient as it has generated 62.7% of EBITDA margins (non-adjusted). The executives view this evolution similar to Amazon's (NASDAQ: AMZN) past decision to open up its marketplace to third-party sellers in addition to selling directly to customers.Ĭonsequently, in the same way as Amazon, the proprietary Rocket platform has the capacity to process millions of transactions a year with the partner network bringing growth and diversification to the business. Thus, partner volume made up 38% of closed loan volume in 2020, up from 23% just two years ago. This ability to thrive on partnerships has been paying dividends. For this matter, Rocket also uses influencer marketing tools. In the Partner Network segment, Rocket continuously aligns its brand with partners who use its platform to provide their clients with differentiated mortgage solutions. In the Direct to Consumer segment, there is interaction directly with clients using various performance marketing channels. The company operates through two segments: Direct to Consumer and Partner Network. It also provides end-to-end visibility into transactions. It also uses analytics to provide clients with real-time quotes and access to mortgage calculators to help them choose the right solutions to support their financial goals. Rocket’s business model has much more to it than just rapidly processing mortgages. In order to provide investors with more insights about the mortgage play, I start with an analysis of the business model. The reason is that this is a misunderstood stock with the last two SA analysts being bearish back in January and February this year. However, the share price did not follow suite, with the one-year returns being only 1.58%. In other words, the company was well placed when the coronavirus struck and its revenues started to increase rapidly as from the second quarter of the year.įigure 1: Trailing total revenues evolution. More importantly, it is not COVID which forcefully had the company to change course, but its digital transformation journey started in 1998, a time when most companies were still wondering how to advertise using the internet. Through its Rocket Mortgage app, used to apply for a housing loan, interact with company's staff and upload as well as sign documents electronically, it has revolutionized the mortgage approval process. Even if Rocket Companies ( NYSE: RKT) won't place a satellite into orbit or take someone to the moon, its online mortgage platform definitely has more of rocket science appeal.
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