The Ratings Game

SoFi’s stock draws extreme reactions. What one analyst thinks will follow the latest surge.

SoFi has ‘several more quarters of growth capacity,’ according to KBW, but it also faces ‘long-term questions’

SoFi’s CEO expects a “great tailwind” as the pause on student loan payments expires.


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SoFi Technologies Inc. shares have surged nearly 50% over the past month, but one analyst is keeping his mixed views on the polarizing company.

“The recent rally and expected lift of the student-loan moratorium leaves us re-underwriting our thesis on SOFI, and while we have long-term questions around the fair-value impact to earnings, cross-selling progress within the financial services segment, and capitalization of the company, we also feel like the bank has several more quarters of growth capacity with credit performance likely stable, which is supportive of 2023 guidance,” Keefe, Bruyette & Woods analyst Michael Perito wrote late Wednesday.

See also: SoFi CEO says a person pulling down $100,000 or more ‘really struggles to live the American Dream’

SoFi’s stock SOFI, +0.74% has benefited from the debt-ceiling arrangement, which will put an end to the federal government’s student-loan payment moratorium at the end of August. But Perito wasn’t sure how much the development changes the narrative for SoFi given that the deal served to formalize an end to a pause that was already expected to occur.

Read: With debt-ceiling deal, student-loan borrowers will start resuming payments in 3 months — here’s how to prepare

The company’s 2023 outlook for revenue and earnings before interest, taxes, depreciation and amortization “largely assumed this, so we don’t necessarily expect a significant change in 2023 expectations,” he wrote. “Increasing confidence around SOFI’s ability to reach consolidated profitability coming out of 2Q23 earnings could serve as a positive catalyst though.”

SoFi’s stock tends to draw extreme reactions, he said, given the strong recent surge but also “elevated” short interest at upwards of 13%. Perito wrote that he preferred to wait on the sidelines, reiterating a market-perform rating in his latest note, though lifting his target price slightly, to $5.50 from $5.

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SoFi Chief Executive Anthony Noto expressed greater confidence while speaking at a Piper Sandler conference Wednesday. He said he’s “incredibly confident in that in the direction that we’re going with some tailwinds behind us now that we really look forward to going to 2024.”

He added that SoFi’s “largest and most profitable business,” meaning student lending, has been “at 25% of its capability” due to the payment pause, but SoFi expects a “great tailwind” from the expiration of that policy. Further, the company is “ready to step on the gas” with home loans thanks to the acquisition of Wyndham Capital Mortgage, which has helped up the company’s Net Promoter Score, a measure of customer loyalty, following the integration.