Send me real-time posts from this site at my email

Why Shares of UWM Holdings Are Rising Today?

What happened

Shares of wholesale mortgage lender UWM Holdings (NYSE: UWMC) rose by as much as 15% Monday morning for no obvious reason. As of 11:40 a.m. EST, that rise had moderated somewhat back to a gain of about 7.8%.

So what

UWM stock has been on an upward trend for most of the last week. On one hand, on the company's recent earnings call, management said mortgage originations in the second quarter are expected to exceed those generated in the first quarter. The company also announced a $300 million stock buyback program that will be in place for the next two years.

But more recently, analysts have cut their earnings estimates for UWM, suggesting previous forecasts had been too favorable.

Image source: Getty Images.

As a wholesale mortgage lender, UWM provides financing to third parties such as independent mortgage brokers, which go out and find the retail borrowers. But after an explosive year for mortgages in 2020, some think the mortgage market may have peaked, especially as inflation concerns could lead to the Fed beginning to boost its benchmark interest rates sooner than had been expected.

Now what

There are a few possible causes that might explain the recent appreciation of UWM's stock. While the prevailing outlook for the mortgage market appears less than superb, some investors could believe those concerns are overblown, and that there will be a few good years of activity before interest rates increase. They could also foresee a strong period ahead for the purchase mortgage market.

Another possibility is that the Reddit group WallStreetBets is once again targeting this stock -- as it has in the past -- because there is short interest on more than 13% of the company's float. I personally would stay away from the stock right now, given the company's outlook and the uncertainty about what's driving the price up right now.

10 stocks we like better than UWM Holdings Corporation
When investing geniuses David and Tom Gardner have a stock tip, it can pay to listen. After all, the newsletter they have run for over a decade, Motley Fool Stock Advisor, has tripled the market.*

David and Tom just revealed what they believe are the ten best stocks for investors to buy right now... and UWM Holdings Corporation wasn't one of them! That's right -- they think these 10 stocks are even better buys.

See the 10 stocks

*Stock Advisor returns as of May 11, 2021

Bram Berkowitz has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.


Popular posts

Welcome! Is it your First time here?

What are you looking for? Select your points of interest to improve your first-time experience:

Apply & Continue