There’s a lot going on with app-based bank SoFi Technologies (NASDAQ:SOFI) stock lately. The company acquired Wyndham Capital Mortgage, a digital-focused mortgage lender. This might or might not prove to be a successful strategy.
Also, SoFi Technologies is susceptible to changes in public policy regarding student loan repayments. All of this adds up to a less-than-stellar outlook for SOFI stock.
Investors should be very cautious with bank stocks in 2023. The collapse of SVB Financial Group (OTCMKTS:SIVBQ) subsidiary Silicon Valley Bank and Signature Bank (OTCMKTS:SBNY) serve as indications of how fragile the banking sector is.
SoFi Technologies isn’t quite as risk-fraught as Silicon Valley Bank and Signature Bank. Still, SoFi has its own set of issues to deal with. If you’d prefer not to be exposed to those issues, that’s fine – you can simply choose not to invest in SoFi Technologies.
| SOFI | SoFi Technologies | $5.75 |
Acquisition Adds Risk to SOFI Stock
Sometimes, it’s better for companies to just stay in their lane. SoFi Technologies definitely doesn’t want to stay in its lane, as the company is jumping headfirst into mortgage lending through the acquisition of Wyndham Capital Mortgage.
Remember, a broader business model isn’t necessarily a better one. SoFi Technologies already offers saving and investing services, financial planning, credit cards, loans and more.
Yet, the company has been consistently unprofitable and has a negative cash flow position in the billions of dollars.
Frankly, it’s questionable whether SoFi Technologies can afford to acquire businesses now. Besides, it will be challenging to succeed in the mortgage lending market during a time when high interest rates are putting a damper on borrowing and lending activity.
Supreme Court Ruling Is Problematic
Meanwhile, the U.S. Supreme Court just dealt a blow to SoFi Technologies. The company attempts to generate some of its revenue from refinancing student loans.
However, the Supreme Court recently “allowed at least $6 billion in student-debt relief for roughly 290,000 borrowers to move forward,” according to MarketWatch.
Plus, there are other wrinkles in the saga involving SoFi Technologies and federal student loans.
Audaciously, SoFi is suing the government over its extension of the moratorium on federal student loan repayments. Multiple members of Congress have expressed their anger over SoFi Technologies’ lawsuit.
Conducting a legal battle against people in the U.S. government is a highly risky and potentially costly strategy.
This is a battle that could go on for months, possibly even for the rest of 2023. However, if you’re not invested in SoFi Technologies, then you won’t have to worry about this.
It’s Not a Great Time to Consider Buying SOFI Stock
It’s fine for financial traders to monitor SoFi Technologies. Yet, the safest strategy is to watch SoFi from a safe distance, to see if the company’s foray into mortgage lending turns out to be a success or a failure.
The Supreme Court’s recent ruling on student loan repayments is clearly a problem SoFi Technologies. The risks outweigh the potential rewards and this is not a good time to consider owning SOFI stock.
On the date of publication, neither Louis Navellier nor the InvestorPlace Research Staff member primarily responsible for this article held (either directly or indirectly) any positions in the securities mentioned in this article.
