- SoFi Technologies (SOFI) is demonstrating leadership on analyst upgrade and 40% premium price target.
- Following mixed earnings release last week, investors are “over-discounting” a growth opportunity in SOFI stock.
- Shares of SOFI stock sets up nicely for buyers.
Financial technology (fintech) firm SoFi Technologies (NASDAQ:SOFI) is bucking the market today. SOFI stock is up 4% on the back of an upgrade from brokerage Piper Sandler following a bearish earnings reaction to all-time-lows last week.
In the wake of last Tuesday’s earnings release, shares of SoFi Technologies finished down more than 12% to new lows. The worst of the SOFI stock fallout saw shares down as much 20% intraday as investors remain hypersensitive to any perceived threats as worries of a global recession grow daily.
The indictment against SOFI stock was due to a reduced revenue outlook of $330 million from $340 million for the second quarter (Q2) compared to Wall Street forecasts of $343.7 million.
Yet, and despite a huge gain in SoFi Technologies to finish the week, Piper Sandler still likes the prospects for significant upside for SOFI stock. Let’s examine why a purchase looks reasonable, off and on the price chart, for SOFI stock investors.
| SOFI | SoFi Technologies, Inc. | $6.91 |
SoFi Technologies to “Overweight” and $10 Price Target
Despite rallying more than 19% on Friday as part of a broader market bid out of fiercely oversold conditions and SOFI shares up roughly 45% from Tuesday’s post-earnings reaction low, Piper Sandler analyst Kevin Barker likes what he’s seeing.
An upgrade from “neutral” to “overweight” and price target of $12 offers a 78% increase to today’s price of SOFI stock. This reflects the analyst’s optimism that shares remain a “buy.” Driving the recommendation, Mr. Barker notes the fintech is primed for a substantial boost in EBITDA that’s currently being “over-discounted” by investors.
Stronger than expected deposit growth, confidence that this summer’s student loan moratorium expiration will boost quarterly adjusted earnings by $20 million to $30 million, and larger financial services revenue growth that’s not being recognized should help with “significant earnings momentum through 2023 and 2024.”
Piper Sandler recognizes that rising interest rates, which have wreaked havoc on SOFI stock and smaller growth stocks in general, remain a headwind. However, it anticipates the stranglehold on price multiples that are in part responsible for the sizable correction will loosen moving forward.
Upgrade Confirms a Buyable SOFI Stock Bottom
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Piper isn’t alone in thinking SOFI stock has room to rally. Not by a long shot.
The median forecast on Tipranks is $11.88. At the same time, the Street’s range high is $22. Additionally, with no sell recommendations, suffice it to say, following analysts in SoFi Technologies has been a losing proposition with shares tumbling from $24.75 since early November.
The group that has been on the right side is SOFI stock’s larger, bearish short interest. Today, that figure stands at nearly 23% of SoFi Technologies float.
There’s little doubt that some of Friday’s price spike was the result of bears covering their positions. But while closing purchases aren’t indicative of bullish buyers, SOFI stock’s weekly chart looks attractive for buyers.
With today’s modest follow-through, shares of SoFi Technologies have confirmed a weekly hammer candlestick and trendline breakout supported by a bullish stochastics alignment just moving out of oversold territory.
SOFI Stock Is a Buy
Aside from interest rate headwinds raised by Piper Sandler, bears will point at items like larger stock based compensation as a problem, an outfit that’s still a couple years from turning a profit, or the possibility of the Biden administration moving the moratorium into a full-blown forgiveness program. It’s unnerving to many investors, but not the end all be all either.
Notwithstanding the SOFI price chart, at a valuation just north of $5 billion, a price multiple of less than 5 times sales, capable leadership in Chief Executive Officer Anthony Noto, raised full year sales and EBIDTA guidance and bank charter opportunities just underway, there’s a lot to be positive about when it comes to SoFi Technologies.
Bottom-line, SOFI is a classic battleground stock. This is not unlike past situations in Amazon (NASDAQ:AMZN), Tesla (NASDAQ:TSLA) or Netflix (NASDAQ:NFLX), as each built their market dominance to the detriment of bears. And while there are no guarantees that investors are looking at “the Amazon of finance,” today is a very attractive spot both off and on the price chart to buy SOFI stock.
On the date of publication, Chris Tyler holds long positions in SoFi Technologies (SOFI) (either directly or indirectly), but no other positions in securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
