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In a report last month, analysts at Truist called SoFi the future of US banking.
Gabby Jones/Bloomberg
Sofi Technologies
The stock was gaining on Monday after the financial services firm landed a target price increase from analysts who believe it is just getting started.
Truist
Securities analysts led by Andrew Jeffrey maintained their buy rating and raised their price target on shares of
SoFi
(ticker: SOFI) at $11 instead of $8 in a Monday report.
Last month, Truist kicked off coverage of SoFi at Buy, calling it the future of American banking. The company started out as a lender focused on refinancing student debt, and its acquisition of Technisys SA last year helped transform it into a full-service bank.
SoFi stock soared 11% to $9.06 in Monday trading, and so far this year has gained 96%. That being said, analysts have mixed views on the company – of those surveyed by FactSet in June, 53% rate it buy, 41% neutral and 6% sell.
“While still controversial, we believe SoFi’s efforts to educate investors about its strategy, liquidity, fair value accounting, financial model and credit quality are paying off,” the Truist analysts wrote. .
They believe the stock’s strong recent performance illustrates the growing appreciation of the opportunity to recoup deposit share and channel that liquidity into high-yield equity lending. Debt ceiling legislation ending the pause on student loans is also seen as a positive.
On May 1, SoFi posted a lower-than-expected net loss for its first quarter, but investors appeared to take its stellar first-quarter personal loan origination numbers as a warning of losses to come, an analyst said, and investors shares fell 12. percent that day, according to Dow Jones Market Data.
And in a 10-Q filed last month, the company wrote that if it is unable to achieve profitability in 2023 as expected, it may raise additional capital in the form of equity or debt. The truistic analysts aren’t worried, writing that they believe the company will turn a small profit in the fourth quarter. They believe the company is approaching a critical inflection point in profitability.
Analysts also pointed to the potential for student loans, adding that SoFi should benefit from the large loss in bank deposits, citing its application, small size and high interest rates on savings accounts.
Write to Emily Dattilo at emily.dattilo@dowjones.com