Rocket Cos. rose in premarket trading, set to extend Tuesday’s 71% surge on sentiment that the home-loan provider could be the latest retail trader favorite for its high short interest.
The stock jumped as much as 17% premarket, before paring gains to trade 5.6% higher at $43.94 as of 5:17 a.m. in New York. Shares rose even after RBC Capital Markets downgraded its recommendation to sector perform from outperform, with a price target that suggests 28% downside.
Rocket hit an all-time high Tuesday after CNBC mentioned the company as a possible new target among traders discussing stocks on Reddit. The stock has more than doubled since it went public in August and now has a market capitalization of about $83 billion.
“It seems heavy short interest in the stock was exposed, driving a jump at the open and the dam burst once heavy open interest in $30 call options were triggered, fuelling another dealer gamma squeeze like we have seen with GameStop,” Neil Wilson, chief market analyst for Markets.com, said in emailed comments.
Rocket carries 46% short interest as a percentage of float, according to S3 analytics. The analytics provider published a report Tuesday identifying exceptionally high trading and option volume for the stock, alongside a large amount of short selling into the rally.
Reddit comment volume for Rocket surged to nearly 19% of total comments on the forum WallStreetBets Tuesday, according to SwaggyStocks, a ticker and sentiment tracker. Rocket was the fifth-most-mentioned company on the market social media platform Stocktwits yesterday, at 3% of 271,666 stories carried on Bloomberg.
Rocket’s jump may have been a matter of time, according to Bloomberg Intelligence analyst Ben Elliott. “Rocket has been a fringe meme stock for a while, so I figured something like this would happen eventually,” Elliott said.