A look behind Rocket Companies’ stock rally

Yahoo Finance’s Julie Hyman, Myles Udland and Brian Sozzi discuss the stock price and short selling boom of Rocket Companies Inc.

Video Transcript

[MUSIC PLAYING]

JULIE HYMAN: Well, shares of one company, whose CEO we talked to earlier in the week, going to the moon, or was it last week? Rocket Companies is the one I'm talking about. Brian Sozzi, you've got to take on this one, which seems to now be the target of a short squeeze.

BRIAN SOZZI: Right, Julie. So for the third straight day, shares of Rocket Company, which is the parent company of Quicken Loans, that is the hottest trending ticker on the very, very, very large Yahoo Finance platform. And we saw yesterday, and I'll show you the stat to the folks at Swaggy Stocks, a 19% increase in Reddit sentiment on the platform as it pertains to Rocket Companies. And Rocket Companies too was also the most watched ticker on that site, Swaggy Stock. So it's a lot of activity in Reddit right now.

And it seems to be having got caught up in that sentiment, the short selling sentiment. And I'm not sure why, because the fundamentals of the business are very strong. No less, about 46% of Rocket Companies shares are, in fact, short. And that compares to GameStop at about 32%, according to S3 Partners data. But we had asked Rocket Companies CEO Jay Farner about this just last Friday after the company reported earnings, how he feels about the short sellers getting involved with his company. Take a listen.

JAY FARNER: And so that lifetime value of the client that we're winning each and every day, we get to spread over all of those revenue generators, not just one. And so I think the shorts are starting to understand that, and I assume over time, we'll see fewer and fewer people shorting the stock. But we're just going to keep doing what we do, which is focus on our platform, focus on our business, focus on great client experience. And I believe the rest will kind of take care of itself.

BRIAN SOZZI: So Myles and Julie, it is bewildering to me why Rocket Companies has been caught up in Reddit activity, and this is a company that's firing all cylinders. Fourth quarter closed loan origination up 111%, net profits up 350%. A real business, unlike a GameStop, dare I say. Maybe it's just a cool name, Myles. Maybe the Reddit traders just like the name Rocket.

MYLES UDLAND: I mean, I think that's kind of overthinking it. It's interesting just to hear a CEO, I think it's always weird when CEOs comment on their stock in general. And I know that you're kind of forced to when you have a huge amount of short interest on the name. And I know that Elon Musk kind of made it cool. Like the cliche would be, if you talk about the stock, then something bad is going to happen. And now that has been turned on its head, because Elon talks about stock all the time and only amazing things have happened as it relates to Tesla shares.

But I think in the meme market, you know you don't have to worry about like oh, no, the LTV is what our investors are really appreciating. And you can just say, well, look, some people on WallStreetBets are talking about RKT, it's also an emoji, we'll leave it at that. Trying to like make it very serious CFA level stuff is to me, kind of missing the moment. But hey, I'm sitting in the cheap seats, so.

JULIE HYMAN: I mean, you can also say absolutely nothing or you can post a picture of an ice cream cone. So there are all kinds of options that are available to people right now.