SoFi Stock: Near-Death Experience, or Deep Discount Bargain?




  • In Business
  • 2022-06-22 20:21:43Z
  • By TipRanks

It's hard to put a positive spin on a stock that's shaved 65% off its value since the beginning of the year - a feat achieved by SoFi Technologies (SOFI). The thing is, such a performance is not an anomaly in 2022. Many stocks are in the same predicament, which raises the question whether the scores of beaten-down names will eventually stage a comeback.

Some will and some won't. After meeting up with SoFi CEO Anthony Noto and CFO Chris Lapointe, Mizuho analyst Dan Dolev thinks SoFi is well-positioned to do so.

"We remind investors that the CEO has built the business during a very choppy environment, and he is confident that he can do it again," the analyst explained. "We continue to believe that SoFi's diversified revenue streams, durable business model and Galileo's BaaS offerings should benefit its fundamentals in the long-term."

Furthermore, defying the macro worries, the demand environment for SOFI's loans appears to be robust. And with members showing an average FICO score of 746 - the U.S.'s average stood at 716 in August 2021 - and boasting an average individual income of $165,000, the company should exhibit "resiliency across cycles."

Additionally, as whole-loan buyers and forward flow partners seek liquidity in better-quality funds, the pivot to "quality" in the ABS market is allowing SOFI to gain share from other loan providers. This, according to management, is significant, since it suggests that the bear argument regarding "funding constraints" on growth may be exaggerated.

"Indeed," says Dolev, "the main constraint on SoFi's growth is self-imposed as they only approve ~30% of the personal loans despite the ability to approve more."

Given the fact many models have yet to experience such an economic downturn, consumer lending companies have put been put under the spotlight recently. As Such, Dolev is reassured to learn there are a total of $2.2 billion of deposits "growing" at $100 million per week.

So, down to the nitty-gritty, then, what does it all mean for investors? Dolev reiterated a Buy rating on SOFI stock, backed by a $9 price target. Should the figure be met, investors will be sitting on gains of ~60% in a year's time. (To watch Dolev's track record, click here)

The rest of the Street sees even greater returns; the average target stands at $10.23, making room for 82% upside. Overall, based on 7 Buys vs. 4 Holds, the stock claims a Moderate Buy consensus rating. (See SOFI stock forecast on TipRanks)

 

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Disclaimer: The opinions expressed in this article are solely those of the featured analyst. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.

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