Shares of SoFi (NASDAQ:SOFI) opened in the green following an upgrade from Bank of America analyst Mihir Bhatia. The analyst upgraded SOFI stock from “neutral” to “buy” and raised his price target to $9 from $8.
Last month, the Biden administration announced that it would extend the federal student loan moratorium “one last time.” The last day of the moratorium will be Dec. 31. Afterwards, student loan payments will start to be collected again, benefitting SoFi.
Bhatia believes that the end of the moratorium and a multi-year partnership with NFL player Justin Herbert will create a “meaningful catalyst path” for the personal finance company. Let’s get into the details.
Why Is SOFI Stock Up Today?
The partnership with Herbert will see him appear in a brand campaign in the form of television commercials and other advertisements. Herbert will also receive an equity stake in SOFI.
Bhatia goes on to explain that SoFi only offers its services to customers will good credit quality, which is important due to the “heightened uncertainty around the health of the consumer.” In addition, he believes that guidance could be raised for the fourth quarter and 2023. The analyst’s price target is based on a 5.5x multiple of enterprise value to expected 2023 revenue.
Meanwhile, Seaport Global Securities analyst Bill Ryan initiated coverage of SoFi with a “neutral” rating and no price target. However, Ryan suggests that a fair value of the stock would be in the $5 range when based on expected 2024 revenues. In addition, he believes that SoFi will not be profitable on a generally accepted accounting principles (GAAP) basis until 2025. GAAP profitability will be the “key driver” in valuing the company due to its “outsized contribution from the Lending segment.”
Like Bhatia, Ryan is concerned about the health of the financial consumer. Still, he believes that SoFi should be somewhat protected from credit risk because it only serves customers with good credit scores. Ryan adds that growth was strong during the first half of the year, but that it should slow down in the second half. As a result, Ryan and Seaport are staying on the sidelines with SoFi.
On the date of publication, Eddie Pan 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.