SoFi (NASDAQ:SOFI) stock is moving higher after the personal finance company received a price target update from Keefe, Bruyette & Woods (KFW).
KFW raised its SOFI stock price target to $7.50 from $6.50 while upgrading its rating to “market perform” from “underperform.” In January, the research firm lowered its price target to $6.50 from $7.50.
While KBW analyst Timothy Switzer still has concerns about earnings risk over the long term, he believes that the risk of near-term negative catalysts has been reduced due to the stock’s more than 20% decline in 2024 and recent capital raise.
On March 5, SoFi announced a $750 million 1.25% senior convertible notes offering due in 2029. It estimated that it would receive $735 million of net proceeds.
“SOFI’s actions to pay down debt/preferred improved the earnings outlook, while raising common equity expanded the length of time it can continue originating loans without a meaningful increase to sale activity,” said Switzer.
SOFI Stock: KBW Raises Price Target to $7.50
Switzer also points out that negative sentiment surrounding SoFi has grown of late. The stock’s short interest as a percentage of float tallies in at 23% compared to 13% at the beginning of 2024. This limits downside, according to the analyst. It could also fuel a short squeeze, which occurs when short sellers are forced to cover their short positions by buying the underlying stock. A short interest above 10% is viewed as high, while a short interest above 20% is viewed as very high.
Earlier this week, Needham initiated coverage of SOFI stock with a price target of $10 and a “buy” rating. Analysts led by Kyle Peterson characterized SoFi as a “long-term winner in the digital lending/neobank space” due to its banking license and focus on customers with high credit scores. The company also has better unit economics in comparison to its competitors without a banking license and who focus on lower-income borrowers.
Needham’s price target is based on a sum-of-the-parts (SOTP) valuation model that provides $8 per share to its lending business and $2 per share to its technology and other fee business.
SoFi carries an average price target of $9.19 among 24 analysts with coverage of the stock.
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.
