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Truist Securities analyst Andrew Jeffrey launched coverage of SoFi Technologies stock with a buy rating and $8 price target in a Friday report.
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Sofi Technologies
gained a cheerleader on Friday, as analysts at Truist Securities began covering the financial services company with a buy rating and a price target of $8.
“We see SoFi as the future of American banking: digital, agile and always on,” Truist analyst Andrew Jeffrey wrote in a report released Friday.
Nonetheless, SoFi stock fell 2% to $5.04 in Friday trading. Over the past 12 months, the stock has lost 25%.
“We believe long-term growth investors will embrace SoFi’s strong multi-year organic revenue, earnings before interest, tax, depreciation and amortization, free cash flow and free cash flow return on equity outlook. “, wrote Jeffrey.
Looking at the bigger picture, Jeffrey noted how the bank’s beginnings as a lender focused on refinancing student debt — “like many FinTechs, relying on capital market funding” — have required to establish discipline in underwriting and risk management “to deliver acceptable returns to lending partners.” SoFi’s acquisition of Technisys SA last year helped transform it into a full-service bank.
As a bank, SoFi saw its deposits rise sharply, reaching about $10 billion in the first quarter, from about $1.2 billion a year earlier, he continued, “making it a beneficiary outflows of legacy bank deposits,” he continued.
And indeed, the banking sector has faced significant volatility in recent months, starting with
SVB Financial
,
parent company of Silicon Valley Bank, closing, continuing with
Swiss credit
bend and accept being caught up in
UBS Group
(UBS), and culminating with
Bank of the First Republic
to be sold to
JPMorgan Chase
(JMP). Regional banks have been on a rollercoaster ride.
Jeffrey explained how SoFi generates revenue through lending, technology and financial services, calling lending “a key economic driver.”
And while he’s bullish on the title, others disagree.
On May 1, before the market opened, the company posted a weaker-than-expected first-quarter loss, and SoFi raised its guidance for 2023. Investors, however, seemed to be taking the stellar loan origination numbers. as a warning of more losses to come, sending the stock down 12% that day, according to Dow Jones Market Data.
Given recession-related concerns, possible increased losses in consumer credit are expected, and investors appear to be viewing the sharp rise in personal loans this quarter as a sign of future losses, the Bank said. JP Morgan analyst Reggie Smith at Barron’s at the time. In a May 1 rating after SoFi’s report, he had a neutral rating on the stock.
Among analysts polled by FactSet in May, 47% rate SoFi stocks as Hold and 53% as Buy.
Write to Emily Dattilo at emily.dattilo@dowjones.com
