At first glance, home loan originator UWM Holdings (NYSE :UWMC) may not seem like the most exciting company on the planet. Still, UWMC stock price action has been pretty wild lately.
Source : Shutterstock
I guess we could attribute this to the memes stock phenomenon. When social media traders requisition a stock, its price can reach new highs or drop to painful depths.
This may have happened to UWMC stock, and it could happen again. But then, it’s hard to anticipate and time the next short squeeze powered by Reddit.
Instead of playing this game, investors can look at the fundamentals and financials of the company and make their own decisions. What a design!
A closer look at UWMC stock
Let’s start by taking a trip back in time. On September 23, 2020, UWM Holdings announced that it would go public through a reverse merger with a Special Purpose Acquisition Company (SPAC) Gores Holdings IV.
Here’s a little anecdote you probably didn’t know. The Gores-UWM deal, valued at $ 16.1 billion, was the largest PSPC deal ever at the time.
Now this is where it gets weird. The share price did not jump immediately when the PSPC deal was announced. In fact, its price did not increase significantly until the end of December.
I can’t prove it, but memes may have been responsible for the sudden spike in UWMC stock that took place late last year.
But hey, it’s just me speculating (or SPAC-ulating, in this case). The rally could have been a late reaction to the merger deal. The market, like the universe, is full of mysteries.
Whatever the cause of the stock price surge, the advance was not meant to last long. The new year brought new lows, with UWMC stock falling to $ 6.25 on May 10, 2021.
Glad to see the stock rally partially as stocks traded hands for $ 8.10 early afternoon today.
The 52 week high is $ 14.38 which should provide bulls with a realistic price target for the remainder of the year.
The best first trimester
Based on the company’s exceptional first quarter results and milestones achieved, UWM Holdings President and CEO Mat Ishbia has gained some bragging rights.
“The first quarter of 2021 was not only the best first quarter in our 35-year history, it also marked our first quarter as a public company and solidified our basis for growth,” Ishiba recently observed.
Before digging into the data, here’s a brief history. about the company. UWM Holdings is the indirect parent company of United Wholesale Mortgage.
And that company has been America’s leading wholesale mortgage lender (in terms of origination) for six consecutive years.
There is no denying that UWM Holdings has had a spectacular quarter. In particular, the company’s first quarter net profit amounted to $ 860 million.
Surprisingly, this is an increase of 42 times over the previous year.
Don’t miss this detail
In addition, UWM Holdings reported that its first-quarter start-ups in terms of loan volume climbed 16 percent year-on-year to $ 49.1 billion.
This is not a bad gain at all.
Now I can understand why the headlines were the 4,200% year-over-year increase in quarterly net income. I mean, it’s something you don’t see every day.
However, there is one more detail that deserves your attention.
The board of directors of UWM Holdings has reportedly “authorized a share buyback program of up to $ 300 million over the next 24 months”, effective May 11 of this year.
Share buybacks are usually a good sign. They often signal a company’s confidence in its continued profitability.
Plus, it’s encouraging to know that a company can afford to buy back its own stock, as financially troubled companies typically don’t.
The bottom line
Focusing on the value of UWMC stocks may not be the best strategy.
UWM Holdings does extremely well on its own and doesn’t need the Reddit crowd to increase its inventory.
After checking the financial data and the news of share buybacks, you’ll see that UWM Holdings is worthy of the real estate market worth, memes or no memes.
At the date of publication, David Moadel had (directly or indirectly) no position in the securities mentioned in this article. The opinions expressed in this article are those of the author, subject to the publication guidelines of InvestorPlace.com.