The Detroit company's shares at last check were off 2.4% at $23.97. They have traded on Tuesday down as much as 8.2%. The company went public early last month at $18 a share.
“To own RKT shares at current levels, investors must believe 1) every refinance-able loan will do so in the next four to six quarters, 2) the company will increase its market share of refinance volumes by 50% over the same time frame, all while 3) gain on sale margins remain at current (elevated) levels,” Susquehanna analyst Jack Micenko said in a note cited by Bloomberg.
Investors must also give Rocket a “financial-technology multiple and not a mortgage price-to-earnings multiple, despite fintech peers having far better revenue visibility and margin sustainability,” the analyst wrote.
Tight inventories of homes could limit growth, the analyst said.
He also noted that Rocket faces potential competition from banks, which view mortgages "as a key customer-acquisition tool, a beachhead to sell consumers other products and services over time."
Last week, shares of Rocket fell after the company reported its first quarterly earnings post-IPO.
Earnings in the second quarter were $3.5 billion on revenue of $5 billion. Adjusted earnings before interest, taxes, depreciation and amortization were $3.8 billion.