Rocket Companies vs. Loan Depot: Which Mortgage Lender Is a Better Buy?

: RKT | Rocket Cos. Inc. News, Ratings, and Charts

RKT – Both Rocket Cos. (RKT) and Loan Depot (LDI) have performed extremely well in 2020, as a low interest rate environment has driven the demand for mortgages. However, as interest rates are likely to move higher, which stock should you bet on right now?.

In response to the severe economic issues caused by the coronavirus pandemic, the Federal Reserve cut the federal funds rate to a range of 0% to 0.25% on March 3, 2020. The fed funds rate is the rate that banks pay to borrow from each other overnight. 

As a result, fixed mortgage rates tumble to lowest levels in history.  This led to a boom in the mortgage industry in 2020, as people rushed in to take advantage of cheap home loans.

However, recently mortgage rates have been rising, as the economy is expected to rebound in 2021, due to COVID-19 vaccines and the massive stimulus packages from the US government.

Today, we analyze two companies that are part of the mortgage industry,  Rocket Cos. (RKT) and loanDepot (LDI), to analyze which is a better buy right now.

Rocket Companies is a solid long-term pick

RKTs is a Detroit-based holding company that provides real estate, mortgage, and financial services, making it one of the largest mortgage lenders in the U.S. In 2020, Rocket Companies’ mortgage originations stood at $320 billion, up from $145 billion in 2019.

It has successfully built a brand allowing the firm to double its loan volume in a pandemic-hit 2020. The company’s sales rose by 144% year over year to $4.7 billion while net income was up 277% at $2.8 billion in Q4 of 2020. It ended the year with $15.7 billion in sales and a client retention rate of 91%.

The interest rates that were near record lows last year, created a huge demand for home refinancing and new mortgage purchases that drove top-line growth for Rocket Companies.

Rocket Auto which is the company’s automotive retail marketplace facilitated over $750 million in GMV (gross merchandise volume) of online automotive transactions in 2020. This platform enabled the sale of around 32,000 auto units last year, a growth of 61% year over year.

Now with the possibility of interest rate hikes, it is very difficult for RKT to experience similar revenue growth in 2021. However, the company has an 8% market share in the U.S. and continues to invest heavily in technology.  In 2020, the company invested $500 million in technology to expand its monthly loan production capacity.  And it invested $900 million in marketing, which has successfully attracted the millennial home buyers. 

In Q1, the company’s origination loan volume is forecast between $98 billion and $103 billion, indicating a sequential decline of just 5%.

Is loanDepot a buy right now?

LDI was launched in 2010 and has quickly gained traction to become one of the largest retail mortgage lenders and the second-largest non-bank mortgage lender in the U.S. It has funded over $275 billion in mortgage loans since its inception.

In Q4 of 2020, LDI originated $37.4 billion in loans, a sequential increase of 38%. In 2020, loan originations rose 122% to $100.8 billion. Its gain on sale margin stood at 4.27% in 2020, up from the prior-year figure of 2.81%. This margin is basically the difference between the retail and wholesale cost of mortgage.

In 2020, the company’s sales more than tripled to $4.3 billion while its net income stood at $2 billion. At the end of 2020, LDI held $103 billion in its unpaid principal balance mortgage servicing book. It is a popular asset for originators like LDI as its value rises with a corresponding increase in interest rates.

The final takeaway

We have seen both RKT and LDI deliver stellar results in 2020. However, with mortgage rates climbing, it’s expected that their 2021 results won’t be as impressive.

Investors should also note that both of these stocks went public within the past 12 months, which means they could be more volatile than companies that have been established on public markets for a long period of time.

Analysts tracking RKT have a 12-month average target price of $26.33 which is 14% higher than its current trading price

LDI has a 12-month average target price of $23.73, which is 12.25% higher than its current trading price.

In 2021, I believe both of these stocks should perform similarly. However, it’s my opinion that if you’re to pick one of these companies to invest in, RKT is a better stock right now. That’s because of RKT’s larger size and the massive investments in technology and marketing the company recently made.

Want More Great Investing Ideas?

How to Ride the NEW Stock Bubble?

“MUST OWN” Growth Stocks for 2021

5 WINNING Stocks Chart Patterns

11 Top Stocks for March 2021


RKT shares were trading at $23.07 per share on Wednesday morning, up $0.03 (+0.13%). Year-to-date, RKT has gained 14.09%, versus a 5.00% rise in the benchmark S&P 500 index during the same period.


About the Author: Aditya Raghunath


Aditya Raghunath is a financial journalist who writes about business, public equities, and personal finance. His work has been published on several digital platforms in the U.S. and Canada, including The Motley Fool, Finscreener, and Market Realist. More...


More Resources for the Stocks in this Article

TickerPOWR RatingIndustry RankRank in Industry
RKTGet RatingGet RatingGet Rating
LDIGet RatingGet RatingGet Rating

Most Popular Stories on StockNews.com


:  |  News, Ratings, and Charts

Investor Alert: Keep Calm and Carry On

The stock market (SPY) took a scary turn on Monday as news of Evergrande culminated in a worldwide sell off. Now with a little time and perspective investors see this was more smoke than actual fire creating a buy the dip event. Why did this happen? And where do stocks head next? Read on for those answers and more below...

:  |  News, Ratings, and Charts

2022 Stock Market Outlook

The stock market (SPY) has continued on a bullish path in 2021. Will that continue in 2022? And what could happen to awaken the bear market from hibernation? 40 year investment veteran Steve Reitmeister explores this and more in this early edition of his 2022 Stock Market Outlook. Read on for full details below...

:  |  News, Ratings, and Charts

3 Cheap Healthcare Stocks to Buy Right Now

Healthcare stocks saw renewed interest due to the onset of the pandemic, but It’s not only COVID that is driving returns. The Baby Boomer generation is getting older, which is resulting in increased demand for healthcare products and services. That’s why investors should consider adding undervalued healthcare stocks such as Ironwood Pharmaceuticals, Inc. (IRWD), Nu Skin Enterprises, Inc. (NUS), and Bristol-Myers Squibb Co. (BMY) to their portfolio.

:  |  News, Ratings, and Charts

3 Value Stocks to Buy While You Still Can

After outperforming from last fall into the spring, value stocks have been overtaken by growth stocks, but that is expected to change as the economic recovery continues. So, now is the time to start putting your money to work in undervalued companies that offer the potential for strong returns such as Gilead Sciences Inc. (GILD), HP Inc. (HPQ), and CNH Industrial N.V. (CNHI).

:  |  News, Ratings, and Charts

3 Cheap Healthcare Stocks to Buy Right Now

Healthcare stocks saw renewed interest due to the onset of the pandemic, but It’s not only COVID that is driving returns. The Baby Boomer generation is getting older, which is resulting in increased demand for healthcare products and services. That’s why investors should consider adding undervalued healthcare stocks such as Ironwood Pharmaceuticals, Inc. (IRWD), Nu Skin Enterprises, Inc. (NUS), and Bristol-Myers Squibb Co. (BMY) to their portfolio.

Read More Stories

More Rocket Cos. Inc. (RKT) News View All

Event/Date Symbol News Detail Start Price End Price Change POWR Rating
Loading, please wait...
View All RKT News