Better Days Ahead for SoFi Technologies (NASDAQ:SOFI) Stock?
Stock Analysis & Ideas

Better Days Ahead for SoFi Technologies (NASDAQ:SOFI) Stock?

Story Highlights

The ending of the pause on student loan payment moratorium removes a major growth hurdle for SoFi. This will drive higher student loan originations, in turn, boosting the company’s financials.

Shares of SoFi Technologies, Inc. (NASDAQ:SOFI) have nosedived 61% so far this year in response to the Biden administration’s decision to extend the student loan moratorium. However, with the reduction of COVID-19 cases and the final extension ending December 31, 2022, SoFi could again benefit from higher student loan financing, implying that better days are ahead for this financial technology company. 

Citing the ending of the pause on student loan payment moratorium, Bank of America Securities analyst Mihir Bhatia upgraded his rating on SOFI stock to a Buy. Further, the analyst has increased his price target to $9 (45.9% upside potential) from $8. 

Along with Bhatia, Wedbush analyst David Chiaverini is also upbeat about SoFi’s prospects. Chiaverini said, “Student loan originations in 2023 are poised to rebound from depressed levels; and its bank charter should accelerate earnings growth.” 

Given the massive decline in SoFi stock and improving prospects, the obvious question is what’s in store for its shareholders.

What Is the Price Target for SoFi Stock?

SOFI’s average price target of $8.11 implies 31.4% upside potential. Though the ending of the student loan moratorium removes a significant growth hurdle for SoFi, macro headwinds keep analysts cautious but optimistic about its stock.

On TipRanks, SoFi stock commands a Moderate Buy consensus rating based on six Buys and four Holds.

Giving positive signals, hedge funds can be seen accumulating SOFI stock (hedge funds have bought 15.3M SOFI stock in the last three months). Overall, SOFI stock sports an Outperform Smart Score of nine out of 10 on TipRanks, implying that it is more likely to beat market expectations.

Bottom Line

There is no denying the fact that a slowdown in student loan financing activity has negatively impacted SoFi’s performance. However, the company’s stellar personal loan growth and strict credit standards (borrowers with high incomes and FICO scores) have helped its offset any negatives. Further, the approval of the bank charter supports its earnings by driving a high-quality deposit base and reducing the cost of capital. 

SoFi is poised to deliver solid financial performance in the coming years, which should support its stock. However, a higher interest rate environment could ruin the show for SoFi.

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