Shares of SoFi Technologies (NASDAQ:SOFI) have cooled a bit after growing significantly since the start of this year. While the stock has reversed some of its gains, the financial technology company’s management remains upbeat about its lending and financial services businesses. However, the high-interest-rate environment remains a drag, keeping Wall Street analysts neither bullish nor bearish on SoFi stock. Let’s delve deeper.
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SoFi Stock: The Bull and Bear Case
Speaking at Goldman Sachs’ 2023 Communacopia and Technology Conference, SoFi’s CEO, Anthony Noto, said that he expects a slight uptick in student loan refinancing volumes in Q3 and a “much bigger increase in Q4” due to the end of the federal student loan moratorium. Moreover, the ongoing strength in the personal loans business is expected to be sustained.
Further, on the Financial Services side, its differentiated products have successfully driven direct deposits. The company is leveraging the benefits of its bank license and is growing the low-cost deposit base on its balance sheet. Notably, about 50% of its loans were funded by low-cost deposits, driving its net interest margin higher.
Higher personal loans, the recovery in the student loan refinancing volumes, and a growing low-cost deposit base provide a solid foundation for growth. Moreover, the company is expected to benefit from increased home loan originations.
However, headwinds from high interest rates, a soft refinancing market in the home loan segment, and weak non-interest income continue to pose challenges. Following the conference, Goldman Sachs analyst Mike Ng reiterated a Hold on SoFi stock on September 6. Further, the analyst’s price target of $7 implies about 18% downside potential from current levels. While Goldman analyst maintains a Hold, let’s look at the consensus rating for SoFi stock.
Is SoFi Technologies a Buy, Sell, or Hold?
With seven Buy, seven Hold, and four Sell recommendations, SoFi stock has a Hold consensus rating on TipRanks. Meanwhile, the average SOFI stock price target of $9.85 suggests 17.2% upside potential from current levels.
The Takeaway
SoFi is poised to benefit from the ongoing strength in personal loans, higher home loan originations, and the recovery in student loan refinancing volumes. Also, its growing low-cost deposit base will support higher margins. However, the higher-interest-rate environment continues to pose challenges, keeping analysts sidelined on the stock.
