SoFi Technologies (NASDAQ:SOFI) shares have been on a wild ride recently. After taking a beating due to investor concerns over accounting methods and assumptions, the stock has been on the comeback trail. Boosted by the resolution of the debt-ceiling crisis and a clause in the deal that will end the moratorium on student-loan repayments, the shares have rallied to the tune of 71% since the mid-May lows.
In any case, for Oppenheimer analyst Dominick Gabriele, the accounting concerns were overblown in the first place, with his analysis concluding that the fintech company’s accounting and assumptions are “sound.”
Moreover, Gabriele’s conviction in the company’s financial strength was reinforced after a recent meeting between CFO Chris Lapointe and investors.
“We think we/investors walked away with further confidence in SOFI’s accounting treatment and the large remaining opportunity in student loan originations even with elevated interest rates,” Gabriele noted.
As for that opportunity, SoFi’s FY2023 guidance includes the ending of the student loan moratorium which is “right on schedule” for loans to be originated on August 3.
SOFI anticipates that borrowers with federal student loans will perceive their monthly debt obligations as higher and, as a result, actively explore opportunities to refinance their loans by extending the repayment period, even if the new loans come with higher interest rates. “This overall benefits SoFi,” notes Gabriele.
The company reckons that, even at higher interest rates, federal borrowers alone represent “hundreds of billions of SL refinance opportunity.” Even accounting for the extension of loan terms, they do not anticipate an increase in loss rates. On the contrary, they expect a decrease in loss rates due to the reduction in monthly burdens.
With investor concerns somewhat assuaged, Gabriele raised his price target on SOFI from $7 to $8. However, following the recent gains, that target suggests shares would remain range-bound for the foreseeable future. (To watch Gabriele’s track record, click here)
Turning now to the rest of the Street, where SoFi garners an additional 7 Buys, 4 Holds and 1 Sell, for a Moderate Buy consensus rating. Yet, the recent surge has now taken the shares beyond the $7.29 average target. (See SoFi stock forecast on TipRanks)
To find good ideas for stocks trading at attractive valuations, visit TipRanks’ Best Stocks to Buy, a newly launched tool that unites all of TipRanks’ equity insights.
Disclaimer: The opinions expressed in this article are solely those of the featured analyst. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.
