Tumbling to a price of $11.11 during today's morning trading session, shares of Rocket are now -23.75% below their average target price of $14.57. Does this mean the stock will reverse course? Analysts are giving RKT an average rating of hold and target prices ranging from 11.5 to 18.0 dollars per share.
To understand the market's outlook on the stock, we can look at Rocket's short interest: the proportion of the share float that is tied to short positions. Behind each short position is an investor who believes that the stock will decline in the future. Here, the stock's short interest is 10.6% which means the outlook is split.
Short selling involves borrowing shares and then selling them at current market prices. In the successful version of the strategy, the shares are purchased at a lower price at some time in the future. The investor then returns the shares to the lender, and keeps the profit made on the sell/buy transaction.
One way to get an idea of the market sentiment on a stock is to check its rate of institutional ownership. In the case of Rocket, institutional investors own 70.9% of the shares, which indicates they have a very high stake in the company. What does this really tell us?
Institutional investors such as hedge funds, investment firms, and wealth managers devote significant resources to identifying good investments. If they have decided to invest in RKT, it probably means they believe it is a solid investment choice.
But it could also mean they are buying up shares in an effort to acquire the company or to get seats on the board of directors. Also bear in mind that institutions are fallible (just maybe not quite as fallible as the average retail investor), so they may simply be wrong when they think they've found a good stock.
Overall, there is mixed market sentiment towards Rocket because of an analyst consensus of strong upside potential, a hold rating, an above average percentage of its shares sold short, and an average number of institutional investors. Investors should not base their decisions on market sentiment only, they should also be aware of a stock's fundamentals before committing.
At a glance, here are some essential statistics you may want to know about RKT:
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It has trailing 12 month earnings per share (EPS) of $-0.12 per share
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Rocket has a trailing 12 month Price to Earnings (P/E) ratio of -92.6 while the S&P 500 average is 29.3
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The company has a Price to Book (P/B) ratio of 2.47 in contrast to the S&P 500's average ratio of 4.74
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Rocket is a Finance company, and the sector average P/E and P/B ratios are 20.04 and 1.86 respectively
