Sofi Stock: The Analyst Thinks Sofi Stock Is Worth Buying


SoFi Technologies Inc (NASDAQ:SOFI)

This month, the share price of SoFi Technologies (NASDAQ:SOFI) has experienced a significant decline. Mizuho believes that the arguments put forward in support of the selloff are flawed.

Since the company reported its earnings for the first quarter on May 1, SoFi (NASDAQ:SOFI) shares have fallen by 23 percent. The following day after the report was released, Wedbush lowered its rating on the stock from Outperform to Neutral, citing weak loan sales. On Monday, a Wedbush analyst by the name of David Chiaverini lowered his rating on SoFi stock again, this time to the equivalent of a sell rating. He wrote that he is concerned about the deteriorating condition of the market for loans. However, according to Dan Dolev, an analyst at Mizuho, there are reasons to stay with the financial company.

Although SoFi does lend money to customers for things like education, real estate, and personal expenses, the bulk of its revenue comes from packaging those loans into securities and selling them to investors.

The digital revolution has significantly altered a great number of industries, and the financial services sector is not an exception to this rule. Traditional methods of borrowing money have been completely transformed by the advent of online lending platforms, which offer borrowers increased convenience, flexibility, and accessibility. SoFi, an industry leader in the realm of online lending, has leveraged the potential of technology to produce a lending process that is streamlined and intuitively designed for its customers.

SoFi recognizes that there is more to a person’s financial health than the simple availability of credit options. The platform takes a comprehensive approach to empowering users on their way to achieving financial independence. Not only does SoFi want to make borrowing easier for its customers, but it also wants to boost the members’ overall financial well-being. To accomplish this, the company offers a wide variety of financial products and services.

The fact that SoFi did not make any sales in the segments of personal loans or student loan refinancing during the first quarter is suggestive of a decline in investor demand for these products. SoFi made $78 million in sales related to its home loans segment. During the prior quarter, the company completed whole loan sales totaling approximately $200 million across all of its business segments.

Investors are concerned that SoFi will need to write down the value of its loans as a result of the significant slowdown in loan sales that occurred during the quarter. If this occurs, the company will not be able to achieve profitability this year and may be forced to seek additional funding.

Anthony Noto, the CEO of the company, stated after the earnings report that the need for liquidity and the ability to maximize returns served as the basis for the decision regarding whether or not to sell the loans. And according to Noto, who stated that the company has “maximum optionality” with loans, SoFi has a healthy liquid position. This is due to the fact that the company had deposits of $10 billion at the end of March in addition to other sources of funding.

During the earnings conference call earlier this month, Christopher Lapointe, the Chief Financial Officer of SoFi, expressed his confidence that the company would be able to settle loans at the current market value. He said this during the call.

According to an article that was published on Monday by Dan Dolev of Mizuho, who has maintained his Buy rating on SoFi stock since late 2021, the decision to refrain from selling loans is reasonable. According to his estimations, “SoFi is able to earn roughly 6.4% annualized yield on holding its personal loans, which is more attractive than selling them at 5%,” he wrote. His findings are based on the calculations he performed.

“Bears are mathematically and intellectually off; buy on weakness,” Dolev wrote. “buy on weakness.”

In its most recent earnings report, SoFi stated that if it isn’t able to hit net income profitability in 2023 as expected, “we may raise additional capital in the form of equity or debt.” This statement was made in the event that SoFi was unable to hit profitability in 2023. Wedbush considers this to be yet another justification for selling the stock. Since SoFi’s market capitalization has dropped to $4.49 billion, the company is likely to receive less cash from the issuance of new shares. In April, the company had a market capitalization that was above $6 billion. If the company were to raise additional capital, it could further hurt the stock’s valuation.

However, according to Dolev, the disclosure that SoFi may conduct a capital raise isn’t anything new. As a result, “we believe SOFI included this portion to emphasize its focus on achieving GAAP profitability by the fourth quarter,” he wrote.

When questioned by Barron earlier, SoFi stated that the disclosure was on par with that of previous quarters.

The consensus among market watchers has not changed. A little more than half of the analysts have a bullish outlook on SoFi stock, while 41% of them have a neutral outlook and recommend that investors Hold the stock. Only 6% of the analysts agree with the Wedbush analysts and recommend that investors Sell the stock.

In conclusion, SoFi has solidified its position as a pioneer in the online lending industry by focusing on the needs of its customers, offering a wide variety of products, being at the forefront of technological innovation, and making a commitment to educating borrowers about managing their finances. Individuals have the ability to unlock a new realm of financial freedom by taking advantage of the opportunities presented by SoFi. These opportunities are supported by cutting-edge technology, personalized guidance, and a thriving community. SoFi has the tools and resources available to help guide you toward your financial goals, regardless of whether you are looking to refinance student loans, obtain a personal loan, investigate investment opportunities, or start the journey toward becoming a homeowner.

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