After a blistering rally, SoFi Technologies (NASDAQ:SOFI) stock changed course and has lost substantial value since July. Nonetheless, Truist Financial analyst Andrew Jeffrey expects SoFi stock to double over the next 12 months, implying it could reach $16. However, the higher interest rate environment poses challenges and could hurt the near-term prospects of this financial technology company.
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With this backdrop, let’s understand what’s ahead for SoFi stock.
Factors Affecting SoFi Stock
SoFi continues to deliver solid financial performances and raised its full-year revenue and EBITDA guidance during the second quarter conference call. The company may continue to gain from the sustained momentum in personal loan originations. Further, a steady increase in its deposit base bodes well for growth as it reduces the overall funding costs, expands its lending capacity, and leads to improvements in net interest income and a more stable funding model.
Additionally, the recovery in home loan originations and solid Technology Platform business provide a solid foundation for growth.
However, a high-interest rate environment could hurt loan origination and its performance. Echoing similar concerns, Goldman Sachs analyst Mike Ng reiterated a Hold on SoFi stock on September 6. The analyst is encouraged by the growth in the company’s deposit base and utilization of it to lower funding costs. Nevertheless, the analyst is concerned about “loan origination demand and the price discovery for loans on the balance sheet, as well as the lack of profitability in the Financial Services segment.”
What is the Future Forecast for SoFi Stock?
While Truist Financial analyst Jeffrey expects SoFi stock to double, the near-term headwinds from higher interest rates and lower non-interest income keep analysts sidelined on SOFI stock.
SoFi has a Hold consensus rating on TipRanks, reflecting five Buy, seven Hold, and four Sell recommendations. Meanwhile, analysts’ average price target of $9.83 implies 23.03% upside potential from current levels.
Bottom Line
SoFi stands to gain from the positive momentum in its Personal loan segment and the increase in tech platform fees. Additionally, its expanding deposit base and anticipated rebound in student loan refinancing volumes are positive developments. However, the challenges presented by a higher interest rate environment and tough year-over-year comparisons in the coming quarters keep analysts sidelined and could restrict the upside potential.
