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SoFI Technologies Stock Won’t Reach $25 This Year

There has been plenty of good news about SoFI Technologies (NASDAQ:SOFI) stock recently. That said, I don’t believe that will be enough to take the stock to analysts’ average price target in 2021. 

the Social Finance (SoFi stock) logo is displayed on a smartphone.

Source: rafapress /

In other words, although SoFI has been hot over the past week, I don’t think it will rise to the $24.58 average price target that analysts have given it. The shares currently trade just above $20. 

In fact, SoFi has arguably been hot over the last few months. Yet, despite those gains, it is still down  roughly 15% from its June highs. 

Should SoFi’s Stock Price Be Higher?

The company’s performance over the past few months seems to indicate that things are finally going its way.  Back in mid-August, SoFi’s earnings  included a great deal of positive news. 

The company’s second-quarter revenue, excluding some items, came in at  $237 million, versus analysts’ average  outlook of $215-$220 million of revenue. That’s an 8%-10% beat. 

On top of that, the company also beat the midpoint of its own EBITDA guidance range by  $14 million. It expected its  Q2 EBITDA to be between -$8 million  and $2 million. Instead, the company posted $11 million of EBITDA. 

However, SOFI stock dropped 14% immediately after the earnings release as its profit outlook fell short of analysts’ average expectations

More recently, there have been other bullish signs for SOFI stock. 

Convertible Senior Notes 

On Sept. 29, SoFI issued $1.1 billion of 0.00% senior convertible notes due in 2026. When it issued the notes at an initial conversion price of about $22.41, its stock was trading at $16.01.  Given the notes’ premium to the company’s stock price and their 0% interest rate, they were a clear vote of confidence by the company in its stock. 

The company was signaling that it expects to climb meaningfully in the future. Also, the move suggests that institutional investors are also confident in SoFi and SOFI stock. 

For a deeper dive into the news and its implications,  I suggest reading Mark Hake’s column here.

A Nod From Wall Street 

SOFI stock moved higher on Oct. 11 following a “buy” recommendation from Morgan Stanley analyst Betsy Graseck. 

Graseck believes that SOFI stock can climb much higher and has set a price target of $25 on the equity. She noted that: “Lending is the toughest part of consumer finance as you need to understand credit and deliver excellent customer service.” 

She went on to state that, by lending customers money and reducing their expenses, SoFI is incentivizing customers to return to the company for mortgages, brokerage services, and credit cards. 

I agree with that assessment in principle, as it makes sense. SoFi offers student loans, personal loans, and home loan origination services. Every time a consumer  reduces his or her expenses by using one of those services, he or she is likely to use more of its services. And perhaps SoFI will become a one-stop shop for finance in the future. 

Flawed Businesses

SoFi now gets the most revenue from personal loan originations. Student loans and mortgages are currently generating lower sales for it than personal loans. That only changed in Q2, when personal loans overtook student loans.

 Following the expiration of the government’s rent moratorium, foreclosures spiked. Foreclosure activity is likely to increase, but remain below normal levels for the remainder of 2021. So the outlook of mortgages is mixed. In my opinion, that simply doesn’t give SoFI investors any indication that SoFI’s mortgage business is strong. 

Meanwhile,  the outlook of student loans is also uncertain.

The moratorium on student loans expires Jan. 31, 2022. Students are going to wait to see what the government decides to do afterwards until the end of the year at least. Only at that point will they consider refinancing with SoFI.  Students aren’t going to refinance with lenders like SoFI and possibly lose money by doing so. So SoFI’s student loan business also looks less-than-attractive now. 

The Bottom Line on SOFI Stock

With mortgages and student loans as uncertain as ever, SOFI stock is not attractive. The company is anchored by three business lines, two of which face immediate challenges. Thus, I believe that the shares will not reach analysts’ average price target of $25 anytime soon.

On the date of publication, Alex Sirois did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the Publishing Guidelines.

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