SoFi Technologies Inc. shares saw muted gains Monday after the company delivered an upbeat earnings report, but they were enjoying a far stronger rally Tuesday.
The stock
SOFI,
was up nearly 8% in afternoon action Tuesday as a Morgan Stanley analyst took a less pessimistic view of the financial-technology name.
Morgan Stanley’s Jeffrey Adelson had established an underperform rating on SoFi’s stock back in July, but he moved to equal weight in a Tuesday note to clients. Adelson still worries that revenue expectations for SoFi are too high, but he left Monday’s report feeling more upbeat about the company’s capital position after its disclosure of a $2 billion forward-flow agreement.
“While we remain below consensus revenues in 2024/25, particularly on lower lending fees, we actually walked away from [the third quarter’s] results incrementally more positive on the near-term outlook into 2024,” Adelson wrote.
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Piper Sandler analyst Kevin Barker also highlighted relief over capital pressure in the wake of the forward-flow agreement and commentary around a $375 million securitization with BlackRock.
“The newly announced loan sales started earlier than we expected and are a good sign [SoFi] can reduce the capital intensity of the business,” Barker wrote, while maintaining a neutral rating on the stock and a $9 target price. “We estimated [SoFi] could sell $3.2 [billion] of personal loans in 2024.”
Truist Securities analyst Andrew Jeffrey reiterated his more optimistic view of SoFi shares, cheering the company’s “impressive” lending performance and its better-than-expected contributions from nonlending areas.
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“We recognize that no [near-term] debates w/SoFi bears will be won while rates and recession fears are elevated,” Jeffrey wrote. “Further, detractors will likely point to liquidity, regulatory and accounting worries even amidst mounting evidence that SoFi is transforming banking as the beneficiary of what we consider a generational business model shift.”
In his view, those owning SoFi shares on the basis of fading relevance for traditional banks, among other factors, will outperform the market over a multiyear span.
He rates the stock at buy, although he cut his price target to $14 from $16 in a note titled: “Battlegrounds Create Opportunities.”
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