So Far, SoFi Charter Approval Outweighs Federal Moratorium

Just yesterday, the Biden administration announced an extension of the moratorium of student loan repayments. The President offered the ongoing pandemic and newly emerging Omicron variant of COVID-19 as reason for the changed expiration date. This came as a shift in rhetoric, as the previous extension was considered the last one. Sudden high-profile moves such as these can dramatically affect financial services companies, like SoFi Technologies, Inc. (SOFI). That being said, some analysts see its recent dip as a buying opportunity.  

One of those optimistic about SOFI’s outlook is Sean Horgan of Rosenblatt Securities, who opined that although the stock may not see much upside in the near-term, he believes “student loan originations will begin to ramp above 50% of pre-covid levels once the moratorium ends.” For now, the predicament exists that borrowers will have less incentive to refinance their loans with SoFi. 

The moratorium will run until May 1, 2022, and places “a pause on student loan repayment, interest, and collections.” It has been in place since March 2020, when the onset of government mandated lockdowns caused soaring unemployment and a precipitious drop in economic activity.  

Horgan rated the stock a Buy, and modestly lowered his price target to $28 from $30.  

Maintaining his bullishness, he cited another catalyst for SoFi which could prove as a stronger counterweight to the current setback. The financial services firm is currently awaiting a pending decision on obtaining a national bank charter, which is estimated to far outweigh the moratorium in regard to upside for EBITDA.  

The analyst is confident that an approval will come sometime in the second half of 2022, calling it a question of “’when’ not an ‘if’ situation.”  

Until this charter is announced, the pressure is on for near-term investors. SoFi’s upcoming earnings are inching closer, which is both within the new moratorium extension and before any meaningful upside can be generated by a national bank charter.  

Horgan is not alone in his positive long-term sentiment. On TipRanks, the analyst rating consensus for SoFi Technologies stands as a Strong Buy, and is based on 6 Buy and 2 Hold ratings. The average SOFI price target is $24.50, reflecting a possible 12-month upside of 63.44%. The stock closed trading on Wednesday at a price of $14.99 per share.  

Disclosure: At the time of publication, Brock Ladenheim did not have a position in any of the securities mentioned in this article.