JPMorgan ‘incrementally cautious’ on SoFi after student loan rally

JPMorgan analyst Reginald Smith keeps a Neutral rating on SoFi Technologies with a $6 price target and is “incrementally cautious” on the shares at the current valuation. The shares are up nearly 60% over the past month and trade at 2.6-times tangible book, nearly twice the unsecured consumer credit card average, the analyst tells investors in a research note. This seems to price in not only a surge in student loan originations, but also a rising mix of fee-based, asset-light lending that leverages the asset backed security and whole sale loan markets, the analyst tells investors in a research note. The firm continues to believe holding student loans on the balance sheet is a sub-optimal use of capital for SoFi, as returns are “considerably lower” than personal loans. SoFi management sizes the multi-year addressable student loan refinance opportunity at $200B, while JPMorgan’s work suggests the actual opportunity is closer to $90B, the analyst adds.