After a swift rally in SoFi Technologies (NASDAQ:SOFI) stock, a pullback ensued but caution is still advised.
Recent developments pertaining to student loan repayments, and the benefits that SoFi Technologies will gain, were already anticipated and factored into the SoFi Technologies share price. So, don’t be surprised if the shares decline to $6 in the coming weeks.
SoFi Technologies still represents the future of modern banking and personal finance. There’s no need for investors to completely abandon SoFi Technologies, but you shouldn’t just buy the shares at any price.
Patience is crucial, so keep your eyes peeled and be prepared to strike when the price is right.
SOFI Stock’s Furious Rally
When a stock doubles in price in six months, momentum-focused traders will celebrate but I get cautious.
SOFI stock surged from $4.50 at the beginning of the year to more than $10 in June, and then finally pulled back to $8. It wouldn’t surprise me at all if the share-price pullback continues in 2023’s second half.
I’m not saying that investors should completely abandon SoFi Technologies. After all, the company’s revenue growth and earnings-loss shrinkage have been impressive.
Furthermore, SoFi Technologies has a major catalyst. Specifically, the Supreme Court struck down the Biden administration’s plan to forgive/waive a large number of federal student loans.
The pause in required federal student loan repayments is set to end soon; the first of those repayments will reportedly be due in October.
SoFi Technologies and the Efficient Market Theory
It’s true that SoFi Technologies generates significant revenue from helping borrowers refinance their student loans. However, don’t assume that SOFI stock will shoot higher in October because of the scheduled student loan repayments.
Believe me – the market has priced-in and analysed everything that I’ve mentioned. That’s the efficient market theory in action: all news and expected future catalysts are immediately baked into asset prices.
Thus, the aforementioned May-to-June rally in SOFI stock isn’t an accident, and it’s not solely based on SoFi Technologies’ revenue growth.
The benefits that SoFi Technologies will gain from the resumption of required student loan repayments is, without a doubt, a known and priced-in factor.
Compass Point Research analyst Giuliano Bologna even called the SoFi Technologies share-price rally overdone. Moreover, Bologna initiated his coverage of SoFi Technologies shares with a “sell” rating and a $5 price target. Ouch!
So, Is It Too Late to Buy SOFI Stock?
Don’t get the wrong idea. For the long term, I still believe in SoFi Technologies as a game-changing neo-bank. However, after a wild share-price rally and what looks like the start of a pullback, I’d say it’s too late to start buying now.
The best strategy, I’d say, is to let the pullback continue for a while. Keep the efficient market theory in mind, and watch for SoFi Technologies’ upcoming financial reports.
If you’re looking for a specific dollar figure, let SOFI stock to fall to $6 before jumping into the trade. And remember: price-chasing is strictly forbidden, so just be patient with the market and with SoFi Technologies.
On the date of publication, David Moadel 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.
