Morgan Stanley upgraded Rocket Companies (RKT) to "Overweight" from "Equalweight" on Thursday. The bank increased its price target to $19 from $18 per share.
The upgrade follows a significant decline in the company's stock. The stock has fallen roughly 25% year-to-date.
Morgan Stanley bases its decision primarily on valuation. The bank suggests the current stock price factors in an overly pessimistic scenario of sustained high mortgage rates.
The bank believes the risk-reward profile is now favorable. It cites the company's potential for earnings growth through continued market share gains.
Rocket Companies' stock rallied in pre-market trading following the announcement.