SoFi (NASDAQ:SOFI) stock is lower by more than 5% today following the initiation of coverage by Compass Point analyst Giuliano Bologna. Bologna assigned SOFI stock a $5 price target.
This price target comes despite compelling news that student loan payments will resume starting in October, following several extensions of the moratorium since the pandemic. SoFi makes a portion of its revenue from student loan refinancing, so this is certainly positive news for the personal finance company.
SoFi CEO Anthony Noto estimates that the student loan refinancing market is worth about $200 billion. Even a 2% market share capture would be worth $4 billion, which is about half of SoFi’s current market capitalization.
Is SOFI Stock Really Worth Just $5?
Wall Street analysts have very mixed opinions about SOFI stock. On Yahoo Finance, price targets range between $3 and $14 for an average price target of $8.32 among 14 total analysts. BTIG analyst Lance Jessurun has the highest price target of $14. Jessurun characterizes SoFi as a leader among the consumer-focused fintech space, although he doesn’t believe the share price has reflected that designation.
The analyst explains:
“Going forward, we expect SoFi to benefit from the successful implementation of the banking charter and associated ongoing deposit inflows, in conjunction with margin expansion, member growth, and the strong adoption of financial services products by members.”
Jessurun also believes that SoFi will achieve GAAP profitability by the end of the year. This will be bolstered by the end of the student loan moratorium.
On the other hand, Oppenheimer analyst Dominick Gabriele recently downgraded shares of SoFi from “outperform” to “perform” and withdrew his price target entirely. Gabriele still has a high-end valuation of $9.50 per share, although he believes that SOFI’s year-to-date (YTD) gain has gotten out of hand to the point where it already reflects 2024 revenue and “the credit we think the SOFI management team is due given execution and diversified business.”
Valuation seems to be a concern for Piper Sandler as well. Earlier this month, analyst Kevin Barker raised his price target to $8 from $6.50 while simultaneously lowering his rating to “neutral” from “overweight.” Barker added that interest rates have moved higher in the past two months and could remain elevated due to sticky inflation. On the bright side, Barker remains optimistic about SoFi’s long-term opportunities.
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.
