SoFi (NASDAQ:SOFI) was once called the “Amazon of the Future of Finance.” Issues swirling around student loans have clouded that future. Recent initiatives and acquisitions made by the company will lift those clouds and make for a brighter stock price for SOFI stock. Patient investors who purchase SOFI now will be rewarded later. Consider selling a covered all against the stock purchase to get rewarded now as well.
The student loan moratorium first enacted during the height of covid is set to expire on May 1. Democtratic lawmakers continue to pressure President Joe Biden to extend the pause until at least the end of the year. This decision will have a meaningful impact on stock performance over the coming months as shares continue to languish. Longer-term, the effect has already been mostly priced in.
SoFi certainly is a big-time player in the student loan world. Pre-pandemic metrics saw over $6.5 billion annually in new student loan generation for SoFi in both 2018 and 2019. Student lending accounted for nearly 60% of all loans made during those years. This number dropped to $4.8 billion in 2020 when the moratorium was first enacted. 2021 saw even further erosion.
The company is taking steps to reduce the reliance on the student loan side of the business. SoFi has continued to focus and grow the other components to make up for the loss in the student loan refinancing revenue stream, such as the recently acquired Technisys, a cloud-based banking platform. This is yet another way for SoFi to further the goal of creating a vertically integrated one-stop financial services platform. The most recent earnings release highlighted that growth.
Shares have been pummeled since making recent highs at the $24 level last November. SoFi stock is down nearly 60% in that time frame and just off the all-time lows. The stock is still well below its special purpose acquisition company (SPAC) IPO price.
Investors looking to invest in the long-term future of finance should consider adding SoFi to their portfolio at current prices. Less risky investors can consider selling covered calls against the stock. This can help cushion against any drawdowns until the moratorium malaise begins to lessen by collecting expensive option premium. Patience will ultimately pay off buying SOFI now. A covered call strategy means you can get paid for that patience.
On the date of publication, Tim Biggam 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 InvestorPlace.com Publishing Guidelines.
