@CDX_EIRE GOGO doesn't look great financially. Why do you like that one?
RKT looks much better financially. The analysts seem luke warm on it. Why is that?
My reason for being in this one is that their debt and interest payments mask a business that is actually profitable with guaranteed income for the next 24 months. Considering it is covid and they are actually profitable and have income to get them through it they should come out strong.
So basically S&P upgraded their debt rating which is what they needed to get a refinance. They pay 10%+ interest on their debt so I believe it looks like they are losing 50-100MM per year but that loss is actually purely their interest payments. Once they refi, it is expected that their balance sheet immediately turns the balance sheet around.
Management has committed to refi'ing before their next earnings call which I think is early March. They sold their commercial aviation business last year and had committed to doing by Q1 2021 but completed it in March. They promised to execute the refi on or before the earnings call I believe.
Its sort of a cross between speculation and high conviction. I've already made a few thousand on them already thanks to them being on the short interest list with AMC and GME but nobody is paying attention to it. So I believe shorts have come back in now (previously it was 50%). I am basically only using a portion of my profits on this play now.
Rocket I don't know as much about. I think the average analyst rating is $25 but I've seen some people say real fair value is $30. Unclear what the metric is tbh.
The fundamental bear case seems to be a future rate increase (which we know wont happen for a couple of years) and what appears to be 28B in debt. This debt is not really a risk. People have called their investor relations and the debt is basically based through the company to the ultimate holders of the mortgage. They hold this debt on average for 18 days. If they cant sell the debt then Fanny Mae and others who through regulation are compelled to buy debt. They sell 98% of these mortgages to the Government because the Government has bailed out these companies.
The shorts think Rocket is a bank with billions of loans outstanding. They are not and thats the opportunity.
Rockets Market share is a big opportunity, I believe they only have 8-10% of the market. They are also increasing optionality by entering into other loan and financing spaces. and They are entering into the canadian market.
Their margins are nuts they made 6B off of 11B in revenue last year.
They supposedly will be announcing a new partnership on their next earnings call.
PE ratio is only like 5, they are anticipated to do 8b off 14b revenue this year and they are a 40B market cap.
Their client retention is around 90%, something like an average of 4 transactions per customer.
90 odd percent of the company is owned by insiders, the float is only 2B and they are already buying back 1B.
The high short interest, strong metrics and handful of possible catalysts such as the partnership and upcoming earnings call could possibly send this to the moon as WSB say.
I am in the process of preparing my mind to handle what I want to do which is put 50% of my trading account into the trade. Currently only have about 7-10%.
