SoFi Technologies Inc.’s stock remains “controversial,” notes Truist analyst Andrew Jeffrey, but the financial-technology company’s management has been improving its messaging.
He wrote Monday that “SoFi’s efforts to educate investors about its strategy, liquidity, fair-value accounting, financial model and credit quality are paying dividends,” while lifting his price target to $11 from $8 and reiterating a buy rating.
SoFi shares
SOFI,
sank 22% in the three sessions after the company’s last earnings report, amid concerns about a lack of recent loan sales as well as trends in the company’s technology-platform business. Shortly after, the company met some concerns from the analyst community about its fair-value accounting methods given quiet loan-sale activity.
But the stock has charged back since then and now stands 31% higher than it did before the post-earnings selloff began. Jeffrey noted “concerted management effort to quell investor concern.”
See also: SoFi’s stock draws extreme reactions. What one analyst thinks will follow the latest surge.
He said concerns about SoFi’s fair-value accounting were “overblown,” while highlighting management’s view that SoFi “retains ample liquidity to grow loans.” By his math, the company can see “meaningful expense leverage across the P&L [profit-and-loss statement” as it gets closer to “a critical profitability inflection point.”
Jeffrey said he sees more business-specific drivers as well. “We submit the stock’s recent surge also reflects growing appreciation for the opportunity to take deposit share and deploy liquidity into high-ROE [return on equity] loans,” he wrote.
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In his view, SoFi is “among the biggest beneficiaries of large bank deposit loss,” as the company can benefit from its “superior app” compelling user experience and 4.3% annual percentage yield. There’s been a “growing appreciation” for SoFi’s competitive positioning, he noted.
The company also stands to capitalize on the impending end of the federal government’s student-loan payment moratorium. That was already expected to end after the close of August, and the recent debt-ceiling deal solidified the timeline.
Read: SoFi’s stock surge continues as debt-ceiling deal brings ‘highly positive development’
“Student loans have superior credit quality and strong life-of-loan economics, in our view, so we are eager to hear more about how this business could ramp,” Jeffrey said in his note to clients.
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