By Liz Moyer — Rocket Companies Inc (NYSE:RKT) is shifting its mortgage business as the once-booming refinancing sector fades amid higher interest rates, and Jefferies believes growing share in the purchase loan business could be a catalyst.

Jefferies rates Rocket Cos a hold with a $9 price target. Shares of Rocket rose 4.3% on Friday and are up 25% this year. The price target implies about 3% upside from current levels.

The analysts examined whether Rocket could repeat its success in mortgage refinancings with mortgages for purchase. Refinancing was hot in 2020 and 2021, with low rates encouraging borrowers to reset. Rocket was able to use its brand and platform to grab market share during that period. But interest rates started shooting higher last year, and now refi activity seems off the table for the foreseeable future, Jefferies said in a research note.

There are potential challenges given the differences between refi and purchase transactions, the analysts said. Purchase mortgages have the potential to meaningfully boost Rocket’s business, but the uncertainty of success is keeping the analysts on the sidelines for now.

Rocket could achieve share gains through acquisitions or by leveraging its other businesses outside mortgages, Jefferies said. “We consider organic and potential acquisition opportunities for RKT to disrupt purchase,” they said. 

At last month’s earnings report, Rocket CEO Jay Farner acknowledged a challenging environment. “Last year marked a period of transformation for Rocket,” he said. “We right-sized our business to respond to a challenging market; we also made key investments to serve our clients better on every step of their home ownership journey.”

Farner added: “With foundational pieces of our client engagement program in place, we are focused on expanding our top of funnel, lifting conversion and lowering our client acquisition cost, with the ultimate goal of growing our purchase market share and extending client lifetime value.”

Rocket’s other businesses outside mortgages, especially its Rocket Money personal finance and budgeting app, help reduce the cost of customer acquisitions and could ultimately boost share gains in the purchase loan business, Jefferies said.

Gaining share in purchase mortgages could enhance Rocket’s results, with potential earnings per share accretion of 37% in 2025 if successful, even if rates stay high, the research note said.

On a balance sheet basis, liquidity is strong, and Rocket “remains well positioned for the next cycle,” Jefferies said.