After a blistering rally, SoFi Technologies (NASDAQ:SOFI) stock has reversed a significant portion of its gains. The shares of the financial technology have witnessed a pullback in August and are down about 28% month-to-date. While SoFi stock has lost much of its value, analysts, on average, are neither bullish nor bearish on the stock. Against this backdrop, let’s delve into SoFi stock.
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SoFi Stock: The Bull and Bear Case
SoFi stock has benefited from the momentum in its personal loan originations and solid revenue growth. The company also recently delivered a better-than-expected Q2 performance and raised its revenue and EBITDA outlook for the full year.
What stood out is that SoFi’s high-quality deposit base continued to grow. The company said it ended the quarter with $12.7 billion in deposits, reflecting an increase of $2.7 billion on a quarter-over-quarter basis. In addition, more than 90% of its consumer deposits are from sticky direct deposit members, and about 98% of its deposits are insured.
While SoFi’s deposit base remains strong, the ongoing momentum in personal loans will likely support its growth. The company’s personal loan originations increased by 51%, which is encouraging. Further, originations for its home loans nearly tripled in the second quarter, implying a recovery in the coming quarters.
SoFi is poised to benefit from higher loan originations, a solid deposit base, and higher-tech platform fees. However, SoFi stock has appreciated quite a bit on a year-to-date basis (including the recent pullback), implying that the positives are priced in the stock. Further, an expected moderation in growth due to tough comparisons could limit its upside potential.
Is SoFi Stock a Buy, According to Analysts?
With seven Buys, seven Holds, and four Sell recommendations, SOFI stock sports a Hold consensus rating on TipRanks. However, the average SOFI stock price target of $9.74 implies 17.49% upside potential from here.
The Takeaway
SoFi could continue to benefit from the ongoing strength of its personal loan business and higher Technology Platform fees. Moreover, the recovery in home loan originations, expansion of its high-quality deposit base, and a strong balance sheet with healthy delinquency and charge-off rates support its bull case.
However, the stock has gained significantly year-to-date, making its valuation rich. Further, analysts’ Hold consensus rating implies that investors should wait for a better entry point.
