JPMorgan analyst downgrades Rocket Companies, Discover Financial Services

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Khosrok

JPMorgan analyst Richard Shane lowered Rocket Companies (RKT) ratings to Neutral from Overweight, with price target reduced to $8.50 from $11.00.

The agency also downgraded the ratings of Discover Financial Services (DFS) and Enact Holdings (ACT) to neutral overweight. The price target on DFS was reduced from $140 to $113, but the price target on ACT was kept at $27.

The analyst takes an “increasingly cautious” view on U.S. consumer credit stocks, according to a note containing the ratings downgrade.

The Neutral rating on Rocket Companies reflects the impact of higher expected mortgage rates on home origination volumes.

For DFS, the agency believes that credit quality and loan growth remain strong. However, an internal investigation probably limits the possibilities for significant multiple expansion and relative performance.

Enact was downgraded due to better relative valuation opportunities with other private mortgage insurers.

Alpha’s quantitative rating system and sell-side analysts give RKT shares an average Hold rating.

The average share price target according to sell-side analysts is $9.06.

DFS also earns a Hold rating from Quant and a Buy rating from sell-side analysts on average, with an average price target of $124.82 from sell-side analysts.

Sell-side analysts give ACT shares a buy rating on average, with a price target of $26.71.

Shares of RKT fell about 6%, DFS about 4% and ACT about 2% after the report.

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