According to an analyst at Keefe, Bruyette & Woods, SoFi Technologies Inc. is a “polarizing” stock, which may be gleaned from its recent price action.
The stock rose as much as 18.9% on Tuesday after the company beat expectations with its latest results, but it pared those gains to end the session up just 5.3%. In Wednesday’s session, SoFi stock SOFI is down -10.65%, down 7.7% after giving up all gains after the gain.
SoFi has “clear earnings tailwinds in terms of bank and balance sheet growth, but also some lending and sales fee issues, in addition to lower tech revenue/profit-run rate,” Keefe, Bruyette & Woods analyst Michael Perito wrote in one Note to customers.
SoFi’s banking operations were the “engine” behind upbeat earnings reports this year as the company benefits from “a larger balance sheet and strong lending capacity,” according to Perito. But he’s still cautious about the stock.
“Until earnings visibility improves, we believe it will be difficult for SOFI to maintain relative momentum in the current macroeconomic environment,” Perito wrote. “The good news, however, is that capital and liquidity ratios are strong, giving the company a healthy amount of capacity to support balance sheet growth and weather a bumpy economy should one materialize in 2023.”
He has a Neutral rating and a $6 price target on the shares.
Others were more optimistic, including MoffettNathanson’s Eugene Simuni, who called 2022 a “bump year” for SoFi’s personal lending business. And he believes there’s more to the company’s story than that.
“The success of the company’s personal loan franchise has enabled SoFi to do this consistently
Exceeding consensus expectations despite mixed performance across the rest of the portfolio,” he wrote. “In Q3, however, another part of SoFi’s franchise delivered an even bigger upside surprise.”
That was SoFi’s startup digital banking business, whose revenue grew 65% sequentially.
“Financial services still make up a small portion of SoFi’s overall revenue base (~10%), but their expansion is a key driver of SoFi’s overall growth trajectory over the next few years,” wrote Simuni, reiterating an above-average rating and a target price of 10 US dollars on the stock.
Dominick Gabriele von Oppenheimer emphasized that the company could be in an excellent position next year.
“SOFI is unique compared to our fintech reporting, where 2023FY could see tailwinds in student loan origination to offset some macro weakness,” he wrote, adding that the company also had room to expand its adjusted earnings before interest, taxes and depreciation (Ebitda) margin “pretty significant”.
He added that “ultimately” long-term investors “will consistently give management credit for execution.”
The stock is down about two-thirds of its value so far this year, while the S&P 500 SPX is down 18%, -2.50%.