- Sofi Technologies (SOFI) shows leadership in analyst upgrades and 40% higher price target.
- After the release of mixed results last week, investors are “overdiscounting” a growth opportunity in SOFI shares.
- SOFI stocks are holding up well for buyers.
Financial technology (fintech) company Sofi Technologies (NASDAQ:SOFI) is against the grain of the market today. SOFI stock is up 4% on a brokerage upgrade Piper Sandler following a bearish earnings reaction to all-time lows last week.
In the wake of last Tuesday’s earnings release, shares of SoFi Technologies ended down more than 12% to new lows. The worst of the fallout from SOFI shares saw stocks fall 20% during the day as investors remained hypersensitive to any perceived threat as fears of a global recession grew daily.
The SOFI stock indictment was due to a reduced revenue outlook of $330 million, down from $340 million in the second quarter (Q2) compared to Wall Street’s forecast of $343.7 million. dollars.
Yet, and despite a huge gain from SoFi Technologies to end the week, Piper Sandler still likes the prospects for a significant upside in SOFI stock. Let’s examine why a buy seems reasonable, off and on the price chart, for investors in SOFI stocks.
|SOFI||SoFi Technologies, Inc.||$6.91|
SoFi Technologies “overweight” and $10 price target
Despite rallying more than 19% on Friday amid broader market supply in fierce oversold conditions and SOFI shares around 45% from Tuesday’s post-earnings reaction low, Piper Sandler analyst , Kevin Barker, likes what he sees.
An upgrade from “neutral” to “overweight” and a price target of $12 offers a 78% increase in the current price of SOFI stock. This reflects the analyst’s optimism that the stock remains a ‘buy’. Originating in the recommendation, Mr Barker notes that the fintech is poised for a substantial increase in EBITDA which is currently “overvalued” by investors.
Stronger-than-expected deposit growth, confidence that the expiration of the student loan moratorium this summer will boost quarterly adjusted earnings by $20 million to $30 million, and stronger financial services revenue growth which is not recognized should contribute to “significant earnings momentum through 2023 and 2024”.
Piper Sandler acknowledges that rising interest rates, which have wreaked havoc on SOFI stocks and smaller growth stocks in general, remain a headwind. However, he anticipates that the grip on price multiples that is partly responsible for the large correction will loosen going forward.
The upgrade confirms a buyable SOFI stock background
Piper isn’t the only one who thinks SOFI stock has room to rally. Not by far.
The median forecast on Tipranks is $11.88. At the same time, the high end of the street is $22. Additionally, with no sell recommendations, suffice it to say that analyst trailing SoFi Technologies has been a losing proposition with shares falling $24.75 since early November.
The group that has been on the upside is the largest bearish short interest in SOFI stock. Today, this figure stands at nearly 23% of SoFi Technologies’ free float.
There is no doubt that part of Friday’s price surge was the result of bears covering their positions. But while closing buying is not indicative of bullish buyers, the weekly chart for SOFI stock looks attractive to buyers.
With today’s modest follow, shares of SoFi Technologies have confirmed a weekly hammer candlestick and trendline breakout supported by a bullish stochastic lineup just emerging from oversold territory.
SOFI stock is a buy
Along with the interest rate headwinds raised by Piper Sandler, bears will point to things like larger equity-based compensation as a problem, a holding that’s still a few years away from making a profit, or the possibility that the Biden administration will move the moratorium into a full-blown pardon program. It’s disconcerting for many investors, but it’s not the end either.
SOFI pricing chart notwithstanding, at a valuation just north of $5 billion, a price multiple of less than 5x sales, capable leadership from CEO Anthony Noto, sales up for the full year and advice on EBIDTA and ongoing bank charter opportunities, there’s a lot to be positive about when it comes to SoFi Technologies.
Bottom line, SOFI is a classic battlefield stock. This is reminiscent of past situations in Amazon (NASDAQ:AMZN), You’re here (NASDAQ:TSLA) or netflix (NASDAQ:NFLX), as each has built their market dominance at the expense of the bears. And while there’s no guarantee that investors are watching the “Amazon of finance,” today is a very attractive place both off and on the price chart to buy SOFI shares.
As of the date of publication, Chris Tyler holds long positions in SoFi Technologies (SOFI) (directly or indirectly), but no other positions in the securities mentioned in this article. The opinions expressed in this article are those of the author, subject to InvestorPlace.com publishing guidelines.