2024-10-15 13:45:03
As a SoFi shareholder, I am sorry the company’s stock price trades 56% below its June 2021 peak of $22.65 — the day the company merged with a special purpose acquisition company.
Despite considerable bets against the company — 17.9% of SoFi’s shares are sold short, according to the Wall Street Journal — the stock could rise further. Here are three reasons:
Analysts are generally optimistic about SoFi and high short-interest in the company could propel the stock further. The reason? If the company continues to exceed investor expectations, short sellers may scramble to buy the stock should brokers issue a margin call.
SoFi’s unique strategy propelled the company’s expectations-beating results for the quarter ending July 30.
Unlike banks, SoFi aims to provide a range of financial services to a specific demographic group. More specifically, SoFi provides lending, banking, insurance, and investment solutions, accessible through a single online platform — to young, high-income people, according to TipRanks, They are dubbed HENRYs — which is short for High Earners, Not Rich Yet.
While SoFi originally supplied HENRYs with student loans and mortgages, the company has since diversified — boosting its resiliency. For example, SoFi’s financial services and technology platform revenue grew 46% in the second quarter — making up 45% of total adjusted net revenue — seven percentage points more than the year before, noted TipRanks.
Here are the key numbers from SoFi’s latest earnings report:
A large investor demonstrated confidence in SoFi’s prospects. On October 14, SoFi announced a pact for Fortress Investment Group to provide $2 billion for personal loans, according to Barron’s.
“The agreement will expand SoFi’s capabilities in its loan-platform business, where the company refers pre-qualified borrowers to loan-origination partners as well as originates loans on behalf of third parties,” SoFi said in a press release.
“SoFi’s loan-platform business is an important part of our strategy to serve the financial needs of more members and diversify toward less capital-intensive and more fee-based sources of revenue,” CEO Anthony Noto said in the release.
With the Federal Reserve cutting interest rates by half a percentage point, SoFi management is likely to become less concerned about the risk of high rates causing economic activity to slow, people to lose their jobs, and loan losses to rise.
While SoFi initially expected revenue to decline 5% in 2024, the Fed interest rate cut in September suggests management may become less pessimistic and profit from improved economic activity — such as lower prospective loan losses and possibly increased demand for loans, noted TipRanks.
Despite surpassing the consensus price target of $8.27, according to TipRanks, analysts are bullish on SoFi stock. Here are three reasons:
With a consequential election just weeks away, plenty could go wrong. Yet Fortress’ $2 billion bet on SoFi’s business is a bullish signal.
Disclosure: I own shares in SoFi Technologies – starting as an angel investor in 2014.
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