Rocket Companies (NYSE:RKT) wants to be known as a fintech company. That’s why it recently spent $1.3 billion buying Truebill, a personal finance app. But RKT stock financials don’t read like those of a fintech.
Even when the company beats estimates, as they did in the third quarter, this is still Quicken Loans, a mortgage finance outfit founded by Cleveland Cavaliers owner Dan Gilbert 35 years ago. Rocket ditched the Quicken name in May.
Rocket had net income of $1.39 billion, 57 cents per share, on revenue of $3.1 billion for the third quarter. For the first three quarters it earned $5.2 billion.
But on Dec. 23 it still had a market cap of just $30 billion, a price to earnings multiple of 5. The stock trades for about $15/share. That’s the kind of valuation Ford Motor (NYSE:F) had a few years ago. Fitting, because Rocket is based in Detroit.
RKT Stock and the Truebill Deal
Rocket is paying a fintech price for Truebill, about 13 times sales. It is just one piece in Rocket’s new plan to expand its platform. CEO Jay Farner calls Rocket “a fintech and e-commerce play.”
Truebill is an app used by 2.5 million people. It links to their bank accounts and lets them track their spending, investments and finances. It was designed to let people track and cancel subscriptions. With so many companies trying to grab subscription income in the internet era, this is a valuable tool to have.
Truebill has expanded that beachhead, becoming a more complete money management app. It now offers spending insights, access to credit scores and help in negotiating bills. The company is also launching a credit card, called the Truecard. It lets people raise their credit scores by paying off balances as it’s used. In its statement announcing the deal, Rocket said it wants to “help clients in complex moments” when they’re looking to buy a home or car.
Yes, car. During the quarter, Rocket launched RocketAuto, an auto market with 400 retail partners that did $530 million in business. It followed this by partnering with Salesforce.com (NYSE:CRM) to put its technology into banks.
Skeptics Abound
RKT stock isn’t seen as a fintech by analysts because it’s not growing like a fintech.
The company closed fewer loans in the third quarter of 2021 than in the same quarter a year earlier. Its gain on the sale of those notes was much lower, just 3.05%, compared with 4.52% a year earlier. Total revenue for the first three quarters of 2021 is behind the same period in 2019.
Analysts aren’t treating RKT stock like a fintech either. There are eight listed at Tipranks, seven of them just saying hold it and one saying sell. Marketbeat lists 13 analysts, with one buyer and two2 sellers. A year ago, it had six buyers and just one seller. The stock’s price was also over $26.
The Bottom Line
In the past, I have damned Rocket with faint praise. I wrote in November it is a simple company with needless volatility. In September, I called it solid and a cheap name to own.
Those are not words Rocket wants to hear. It wants to be a fintech, an economic supermarket, a powerhouse. Farner, who became CEO in 2017, is making moves like one.
If you believe in Farner’s vision, you can still get in on the ground floor with Rocket. You don’t see PEs of 5 very often. Even if you don’t believe in the vision, you don’t see PEs of 5 very often.
On the date of publication, Dana Blankenhorn held long positions in CRM. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
Dana Blankenhorn has been a financial and technology journalist since 1978. Just in time for the holidays he has a collection of COVID-19 stories https://www.amazon.com/Bridget-OFlynn-Virus-COVID-19-Pandemic-ebook/dp/B09K8PSQC8/ at the Amazon Kindle store. Write him at danablankenhorn@gmail.com or tweet him at @danablankenhorn. He writes a Substack newsletter, Facing the Future, which covers technology, markets, and politics.