Should You Buy SOFI Stock? Morgan Stanley Says ‘No.’

SoFi Technologies (NASDAQ:SOFI) is up today despite Morgan Stanley recently downgrading the company. Indeed, SOFI stock is enjoying a solid 4% jump despite concerns related to its refinance business.

the Social Finance (SoFi stock) logo is displayed on a smartphone.
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So what do you need to know about SoFi today?

Well, this morning, Morgan Stanley analysts Betsy Graseck and Jeffrey Adelson downgraded SOFI to “equal weight weight” from its previous “overweight” rating. The analysts argue there remain few short-term bullish catalysts to propel the stock. Graseck wrote:

“A key part of our prior [overweight] thesis was an expectation of a sharp rebound in student loan refi volumes once the Biden administration lifted the federal student loan moratorium, initially set to end after January 31. It looks like we’ll have been wrong twice now, as commentary from the White House in recent days suggests the administration is considering yet another extension, pushing it beyond the current May 1 expiry.”

SoFi’s business operates in three distinct departments: lending, technology, and financial services. As such, recent indications that President Joe Biden’s administration will extend its pause on student loan payments present an immediate bearish sign to SOFI owners. It was previously assumed student loan payments would resume after May 1.

That isn’t all there is to know about SoFi lately, however.

SOFI Stock Climbs Despite Analyst Downgrade

With expectations of continued student loan repayment flexibility, Morgan Stanley lowered its student loan refi forecast substantially. For full-year 2022 the investment bank cut SoFi’s refi projections by roughly 20%.

The analysts also pointed out slower growth in regard to SoFi’s mortgage business.

“We are moving our 2022 home loan estimates down 20%, to $3.2 [billion], as 1) industry mortgage volumes are moving sharply lower in 1Q22, expected to decline ~20% q/q and ~40% y/y, and 2) it will likely take SoFi until at least 2Q to get up to full speed with its new fulfillment partner.”

It seems SoFi’s loan business will require time to see the fruits of its labor. However, despite lower price targets and reduced revenue forecasts, SOFI owners should be happy about its jump today.

On the date of publication, Shrey Dua did not hold (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 InvestorPlace.com Publishing Guidelines.

With degrees in economics and journalism, Shrey Dua leverages his ample experience in media and reporting to contribute well-informed articles covering everything from financial regulation and the electric vehicle industry to the housing market and monetary policy. Shrey’s articles have featured in the likes of Morning Brew, Real Clear Markets, the Downline Podcast, and more.


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