If a stock randomly jumps 70%, there’s probably a good explanation — WallStreetBets.

On Feb. 25, Rocket Companies, who owns the largest mortgage lender in the US, jumped 10% after it reported a strong fourth-quarter and full-year 2020 earnings:

• $15.7b in 2020 sales — more than triple its 2019 sales
• $9.4b in 2020 net income — up more than 10x from 2019

But more importantly, on Tuesday, WSB traders piled into Rocket Companies’ stock — sending it up more than 70%.

Learn more: How WallStreetBets reinvented the way retail investors trade.

Rocket companies, Rocket mortgages, Rocket stock

Founded in 1985, Rocket Companies owns the biggest retail mortgage lender — Quicken Loans, and dozens of other mortgage brands (i.e. Rocket Mortgage, Amrock, etc.).

Rocket differentiated itself from other lenders by investing heavily into its tech platform. While the traditional mortgage application process took weeks, Rocket is known for its mortgage applications that take under 10 minutes.

Since its IPO in Aug. 2020, Rocket’s stock has been down nearly 12%. That is, until Rocket caught the attention of the Reddit community.

2020 was a record year for “X”

In this case, X being home purchases, And record home prices meant record profits for these lenders. But despite big earnings, investors have been cautious with investing in mortgage lenders.

These companies are cyclical and will often fluctuate alongside the housing market. According to WSJ, mortgage lenders are already seeing signs of a turn in the cycle:

• Rising interest rates, which could lower the number of home purchases and loan refinancings.
• Decreasing profits on loans driven by increased competition amongst lenders.

For investors… Are you holding a meme stock?

If you wake up to see your stock up 70% for reasons related to WSB, it could be a good idea to sell and take some profits.

Companies that soared from WSB momentum don’t often stay at their elevated levels.

• GameStop reached a high of more than $480 before losing more than 90% of its value in the following month.
• AMC, Blackberry and other meme stocks that were fueled by WSB had also fallen more than 50% from their highs.

The day after Rocket Companies surged 70%, the stock had fallen back to its pre-WSB days.