All the so-called “inverse Cramer” investors may now ring the death knell for SoFi Technologies (NASDAQ:SOFI) stock. That’s because CNBC personality Jim Cramer has put forward his take on SoFi during yesterday’s lightning round of Mad Money, stating, “I think, if anything, I’m a buyer, not a seller, SoFi.”
Just as quickly as Cramer said buy, investors fled the stock. Shares of SOFI stock are down more than 5% in afternoon trading today following Cramer’s support.
Of course, today’s decline in SOFI stock has much more to do with the overall macro environment than with Jim Cramer’s recommendation. Many investors do take their cues from Jim Cramer, other high-profile investors, and Wall Street analysts on specific stocks. However, the market will do what it does, and today’s move in SoFi appears to be tied to yesterday’s Federal Open Market Committee (FOMC) meeting, in which the Federal Reserve suggested another interest rate hike could be on the horizon after pausing rates for the time being.
With that said, let’s dive into why Jim Cramer may be right on pounding the table on SOFI stock.
SOFI Stock Sinks, Despite Cramer Recommendation
SoFi’s business model, which is primarily focused on student loan refinancing as well as other consumer credit products, could see some headwinds from higher interest rates. That’s because most Federal student loans have fixed rates set at the time the loan was made. Accordingly, in order for SoFi to refinance these loans at levels that make sense (below the rate borrowers took out money at), either the company will need to take a hit, or their higher refinancing rates will lead to less demand.
That’s not taking away from the company’s expected surge in demand, given the restart of student loan payments in a matter of weeks. SoFi has some significant potential tailwinds for the next few quarters as investors look for options to improve their liquidity (via spreading out payments longer) or lowering their interest rates (if that makes sense). Thus, the market’s reaction to yesterday’s FOMC meeting, which didn’t really tell us anything new, could be overdone.
My view on SOFI stock is that this fintech company could be an intriguing speculative contrarian bet right now. The market doesn’t like what it hears, and I understand that. But thinking six to 12 months down the road, I think things could change. We’ll see, but maybe Cramer is right this time.
On the date of publication, Chris MacDonald 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.
