As we expected, the momentum in SoFi’s (NASDAQ:SOFI) business was sustained in Q3. Its stellar financial performance makes it a solid long-term stock. However, concerns around loan originations amid rising interest rates and a weak macro environment raise concerns and keep the stock volatile.
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The financial technology company once again delivered a better-than-expected bottom line. Further, SoFi raised its full-year outlook for the third time.
It’s worth highlighting that SoFi stock closed 5.3% higher on November 1, following its stellar Q3 performance. SoFi’s bottom line numbers have now surpassed Street’s expectations for the fifth consecutive quarter. However, SoFi stock lost all its earnings-led gains and closed 10.7% lower on November 2.
While SoFi’s overall loan originations were strong (led by personal loans and a quarter-over-quarter recovery in student loans), home loan originations declined in Q3 on a quarter-over-quarter and year-over-year basis.
Wedbush analyst David Chiaverini said, “Home loan originations continue to face macro headwinds from rising rates and as the company continues the process of transitioning to new fulfillment partners.”
Looking ahead, the U.S. Fed’s hawkish stance and high inflation could continue to pose challenges for SOFI. KBW analyst Michael Perito is cautious about SoFi’s loan originations and sale fees.
Bottom Line: Is SoFi Stock a Buy or Sell?
SoFi stock has a Moderate Buy rating consensus on TipRanks based on seven Buy and five Hold recommendations. Meanwhile, the average price target of $7.86 implies a solid upside potential of 53.5%.
The continued increase in its new member and product growth, solid momentum in personal loans, and benefits from the bank charter that lowers its cost of capital and supports margins are likely to support SoFi stock in the long term. However, in the short term, SoFi stock could stay volatile due to higher interest rates and macro challenges.
