Despite SoFi Technologies’ (SOFI) strong second-quarter results, the stock’s performance remained lackluster. The company swung to a profit in the quarter, yet shares have fallen by 12.3% since the Q2 results were announced on July 30. Overall, SOFI stock has tanked over 35% year-to-date. Currently, analysts’ consensus rating indicates a Hold, with their average price target indicating potential upside for the stock.
SOFI provides diverse financial services, such as student loan refinancing, personal loans, mortgages, and investment products.
Against this backdrop, let’s dig deeper.
Factors Affecting SoFi Stock
The performance of fintech companies is significantly influenced by the broader economic environment. High interest rates and recession fears can dampen consumer spending and borrowing power, which in turn impacts SoFi’s lending business.
Moreover, the fintech sector is intensely competitive, with both traditional financial institutions and new fintech startups vying for market share.
Additionally, changes in policies regarding student loan forgiveness can greatly affect SoFi’s student loan refinancing business. Recently, the Biden administration announced plans to forgive $1.2 billion in student loans for public service workers. This is expected to negatively impact SoFi’s earnings due to lost interest payments.
Nevertheless, SoFi’s efforts to diversify its revenue beyond lending are expected to support long-term growth. Also, its high-quality deposit base contributes to a lower cost of capital. Along with these positives, SoFi’s on-balance sheet delinquency rates and charge-off rates continue to stay healthy.
What Is the Future of SoFi Stock?
SOFI stock has received four Buy, nine Hold, and three Sell recommendations for a Hold consensus rating. The analysts’ average price target on SoFi stock of $8.15 implies 26.75% upside potential from current levels.
Bottom Line
SoFi’s focus on revenue expansion and improving its credit quality is impressive. Also, access to low-cost capital will likely improve SoFi’s margins. However, near-term concerns about loan growth could limit its top-line growth to some extent.
