SOFI Stock presents investors with a range of potential results

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If the opinion of the analyst community means anything, then SoFi Technologies (NASDAQ:SOFI) is a strong buy for 2022. Currently SOFI stock is more than 60% below its consensus price target of $ 24.63.

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However, since it started trading publicly in December 2020, the stock has made three attempts to hit that mark. And each time, he was pushed back. It may just be comparable to the price with a technology stock, especially for a company that has gone public through a Special Purpose Acquisition Company (SPAC).

Nonetheless, there continues to be both bullish and bearish sentiment on SOFI stocks. I get the feeling that this optimism comes from the individuals who invest in SoFi Technologies more because of the company’s leadership than because of its business fundamentals. This idea of ​​betting on the jockey rather than the horse is not particularly revolutionary, but it may explain why a core of investors remains very engaged.

The bearish sentiment comes from a recent extension of the moratorium on student loans and the general feeling that the pending banking charter may not be the catalyst that many investors are expecting.

For the rest of this article, I’ll explore the current state of SOFI stock.

Know your audience

In a recent article, Investor place contributor Larry Ramer highlighted a key obstacle in the bullish case of SoFi. Specifically, the company’s “super app” may not be so innovative anymore. That’s not to say it wasn’t the case when it launched. However, many traditional banks are adopting SoFi methods. And that means the benefit of choosing SoFi may not be so clear anymore.

Yet one of the reasons why I was optimistic about the SOFI share, it is the company’s ability to remain relevant to its target audience. An example of this is with cryptocurrency.

About a month ago, I wrote that I thought allowing consumers to invest in cryptocurrency could be a key enabler for SoFi. One of the reasons for my belief is that SoFi knows its audience. It is aimed at people open to non-traditional banking options. And part of that means investing in cryptocurrency.

At this time, SoFi does not allow cryptocurrency withdrawals from its platform. It also does not allow crypto deposits from a personal wallet. However, the company has hinted that both could happen. And that could give the business app a key point of differentiation that it is starting to miss.

The outlook for student loans is blurry

SoFi is best known for its student loan portfolio. So there is some feeling that the Biden administration’s extension of the student loan moratorium will be an anchor for SOFI stock. I do not agree. The company has broadened its offer to diversify. And in the quarter that ended in October, SoFi reported that student loan issuance was down 6%.

However, it still forms a large portion of the company’s loan portfolio, and the outlook for student loans is uncertain to say the least. In the first place, like Forbes noted, the Biden administration extended student loan relief did not include the word “final”. And while that doesn’t mean the administration will extend it again, it doesn’t mean they won’t.

Second, the administration remains under pressure to adopt general student loan debt forgiveness. And while that seems unlikely, it also seemed unlikely that the initial moratorium would last nearly two years.

And at the macro level, it is becoming increasingly evident that an increasing number of current high school students are simply refuse to go to university. An acceleration of this trend would be bearish for SoFi stocks in the short term.

Bank charter can be a mixed bag

In my last article on SOFI action, I pointed out that obtaining a banking charter would make the company’s lending operations more efficient. SoFi is not yet profitable, but having a charter would allow it to keep part of its loan arrangements on its balance sheet.

But, I have to come back to Ramer who points out that Square, now To block (NYSE:SQ) the stock has fallen 30% since obtaining its banking license in March 2021.

Is SOFI Stock a buy?

I still think SOFI stock is a buy, if only for that, the sell seems extreme. But there is no reason to go all the way. The bank’s charter is expected to be approved in the first half of 2022. By then, investors should have a better idea of ​​what’s going on with student loans. And investors will also have a better idea of ​​what is going on in the wider economy.

As of the publication date, Chris Markoch does not have (directly or indirectly) any position in any of the stocks mentioned in this article. The opinions expressed in this article are those of the author, submitted to InvestorPlace.com Publication guidelines.

Chris Markoch is a freelance financial writer who has covered the market for seven years. He has been writing for InvestorPlace since 2019.


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