SoFi Technologies Inc. is a “polarizing” stock, according to a Keefe, Bruyette & Woods analyst, and that can perhaps be seen in its recent price movement.
The stock was up as much as 18.9% Tuesday after the company topped expectations with its latest results, but it pared back those gains and ended the session up just 5.3%. In Wednesday’s session, SoFi’s stock
is off 7.7%, having given up all its post-earnings gains.
SoFi “clearly has some earnings tailwinds as it relates to the bank and balance sheet growth, but also some questions around loan origination and sale fees, in addition to the lower technology revenue/profit run-rate,” Keefe, Bruyette & Woods analyst Michael Perito wrote in a note to clients.
SoFi’s banking business has been the “engine” behind its upbeat earnings reports this year, as the company benefits from “a larger balance sheet and strong loan origination capacity,” according to Perito. But he’s still taking a cautious view on the stock.
“Until earnings visibility improves, we think it will be challenging for SOFI to sustain any relative momentum in the current macroenvironment,’ Perito wrote. “The good news, however, is that capital and liquidity ratios are strong, giving the company a healthy amount of capacity to support balance sheet growth and ride out a bumpy economy, should one materialize in 2023.”
He has a neutral rating and $6 price target on the shares.
Others were more upbeat, including Eugene Simuni of MoffettNathanson, who called 2022 a “bumper year” for SoFi’s personal loans business. And he thinks there’s more to the company’s story.
“The success of the firm’s Personal Loan franchise has allowed SoFi to consistentlybeat consensus expectations, despite mixed performance in the rest of the portfolio,” he wrote. “In 3Q, however, another part of SoFi’s franchise delivered an even bigger positive surprise.”
That was SoFi’s startup digital-banking business, which saw revenue rise 65% on a sequential basis.
“Financial Services still makes up a small part of SoFi’s overall revenue base (~10%), but its expansion is a critical driver of SoFi’s overall growth trajectory over the next several years,” Simuni wrote, reiterating an outperform rating and $10 price target on the stock.
Oppenheimer’s Dominick Gabriele highlighted that the company could be in a distinctive position heading into next year.
“SOFI is unique vs. our fintech coverage where 2023FY could see student loan origination tailwinds helping to offset some macro weakness,” he wrote, adding that the company also has room to expand its adjusted earnings before interest, taxes, depreciation and amortization (Ebitda) margin “quite significantly.”
He added that “eventually,” long-term investors “will consistently give management execution credit.”
The stock has lost about two-thirds of its value so far this year, while the S&P 500
has declined 18%.