Rocket's Earnings Fall in Q1 as Higher Rates Bite Into Refinance Volumes; Fair Value Estimate to $14

Narrow-moat Rocket saw another sequential decline in net revenue and income as the impact of rising mortgage rates continues to filter through its business. Adjusted net revenue (excluding a $739 million positive adjustment to the value of its mortgage servicing assets) fell 52% from last year to $1.9 billion. This decrease drove adjusted net income to $293 million from $637 million in the prior quarter. Rocket’s results are being impacted by a sharp increase in mortgage rates, which have risen from below 3% at the end of 2021 to mid-5% currently. This has led to far lower levels of refinance activity, which are a strength of Rocket’s, and will likely add pressure to purchase loan volumes industrywide.