RKT , Read the financial statements before investing , Bearish Rkt's first earnings report, beat significantly, and in my opinion tricked quite a few people, I suppose was a good example of the saying " buy the rumor , sell the news" .
That first earnings report was, at first glance, nothing short of amazing but then the drop to laggard status ... why ?
Also , why the high short interest and why the recent institutional ownership sell off ?
There is a series of reasons...
I took a dive into RKT's financial statements, analyst forward estimates and I can see that they support the stocks move down.
I also think there is a good possibility of a further breakdown in share price going forward .
I am going to go over the main points and let interested parties know where to look to see the fine print as I think quoting financial statements is somewhat inefficient when you can go look at them directly.
I highly suggest you take a look at their yearly :
Balance sheet
Income statement
Cash flow statements .
*I also suggest looking at their detailed analyst forward estimates .
I focused on their debt , revenue trends and took a look at the analysts forward estimates for EBIT and EPS.
Their debt is alarming , particularly their short term debt. Debt has grown exponentially since 2019 , which was pre ipo, but has continued to grow post IPO.
NOTE: I am not sure the reason behind this debt, more research is needed there as I can see the long term and short term debt but not the reason for it and pre IPO short term notes are hard to find info on too . None the less, a red flag needing more research for sure imo. It's not like their debt is increasing along with eps right. Debt is "rocketing" , pun intended, and eps is losing steam , not a good combination .
Yearly revenue trends is mixed , mostly bearish I'd say but we are up and down here... definitely not bullish though for that we want to see a nice consistent growth , preferably a history of increased sales accompanied with earnings growth and beats .
Also, quite concerning is forward analyst estimates as the 2020 to 2022 EBIT and EPS estimates are WAY down .
I know I said I wasn't going to quote data but here is some analyst estimates for EBIT and EPS to give you an idea.
EPS 2020 $3.85 ( 15 analysts )
2021 $1.91 ( 15 analysts )
2022 $1.72 ( 14 analysts )
EBIT 2020 9 Billion
2021 5 Billion
2022 4 Billion
( all rounded to nearest billion )
So , just some basics but we have significantly increased debt and eps/ebit that's expected to trend down and that would justify reduced share price and a potential breakdown in the future to form a new low .
I think that Rocket's potential share buyback announcement is simply because they are trying to use it as a means to keep the share price from dropping too much and I don't think its "positive" I think its a spin .
In summary , I have found that for a stock to preform well it needs a catalyst and that catalyst is usually in the form of earnings growth , sales growth and better margins . So , for RKT to turn things around , we need to see that or there is definitely more downside potential .
Just my 2 cents .
Good luck ~
