SoFi Stock Price Down 12% Today– Time to Buy SOFI Stock?

SoFi stock is trading down over 12% today and hit its 52-week low of $7.64 today. The company went public last year through a reverse with Social Capital Hedosophia Holdings IV (IPOE). The SPAC was sponsored by Chamath Palihapitiya, who has earned his reputation as the “king of SPACs.”

While all of the Palihapitiya-backed stocks fell below the SPAC IPO price of $10, SOFI largely managed to hold its ground. With the stock now falling to a fresh low, should you consider buying it?

SOFI stock recent developments

Today, SOFI lowered its 2022 guidance after President Biden extended the moratorium on student loans. The moratorium has been extended multiple times and the company believes that given the upcoming midterm elections, it could be extended beyond the current deadline of 31 August.

SOFI now expects to post net revenues of $1.47 billion in 2022, which is $100 million lower than its previous guidance. It also lowered its adjusted EBITDA guidance by $80 million and now expects the metric at $100 million.

68% of all retail investor accounts lose money when trading CFDs with this provider.

Biden extends student loan moratorium

In its release, the company said, “Even with the assumption of no end to the moratorium in 2022, our new full year 2022 financial guidance represents approximately 45% year-over-year Adjusted Net Revenue growth to $1.47 billion, a tripling of Adjusted EBITDA to $100 million, and a doubling of margins. SoFi has done an outstanding job achieving record financial results, member and product growth and consistent profitability, despite the negative impact of the extended student loan payment moratorium.”

Notably, several Wall Street analysts were bullish on SOFI expecting an end to the student loan moratorium. The company’s student loan refinancing business is running at half of the pre-COVID-19 pandemic levels. Simply put, buyers don’t have any urge to go for student loan refinancing amid the moratorium.

The decision was largely expected

Meanwhile, Biden’s decision to extend the student loan moratorium is not exactly a surprise. Given the multi-decade high inflation and his falling popularity, it looked almost certain that he would extend the moratorium. The next extension also looks almost certain as it would be due only a few months before the midterm elections.

Analysts were getting apprehensive over SOFI

Over the last month, several analysts were getting apprehensive about SOFI fearing an extension of the student loan moratorium. Last month, Morgan Stanley analyst Betsy Graseck downgraded the stock from overweight to equal weight and lowered his target price from $18 to $10.

In his note, Graseck said, “A key part of our prior OW thesis was an expectation of a sharp rebound in student loan refi volumes once the Biden administration lifted the federal student loan moratorium, initially set to end after Jan. 31.” He added, “It looks like we’ll have been wrong twice now, as commentary from the White House in recent days suggests the administration is considering yet another extension, pushing it beyond the current May 1 expiry.”

SoFi bank charter

In January, SOFI received permission to acquire Golden Pacific Bancorp and become a bank holding company. The bank charter is a key growth driver for the company and would help it increase its profitability on a sustainable basis.

Commenting on the bank charter, SOFI said in its release that “Management’s view is that operating as a bank holding company can enhance SoFi’s overall profitability.” It added, Management believes that moving from a reliance on third-party bank holding companies by operating under a national bank charter will allow SoFi to provide current and prospective members broader and more competitive options across their financial services needs, including deposit accounts and loan products, while lowering the overall cost to fund loans.”

Analysts are getting bearish on the stock

The stock had popped up on the bank charter news. However, Bank of America said that the positive news was baked into prices and downgraded it from a buy to neutral and assigned a $14 target price.

“A core plank of our Buy thesis was that the street was underestimating the potential upside from the Bank Charter in 2022 numbers. With guidance now reflecting this upside, the story turns to execution,” said Bank of America analyst Mihir Bhatia.

He added, “SOFI has executed well to date. However, 2022 guidance is back-end loaded and we think it could take some time for investors to gain confidence it can be achieved.”

SOFI stock forecast

Of the 14 analysts covering SOFI stock, eight rate the stock as a buy while the remaining six have a hold rating. The stock has a median target price of $14 which is a premium of 82% over yesterday’s closing prices. The street high target price is $22, which is a premium of 186%.

SoFi’s long-term forecast looks positive as fintech companies continue to snatch market share from traditional banks. The company is a financial services powerhouse having multiple products under its fold.

SoFi’s top line is growing at a fast pace and it expects its revenues to increase 43% annually between 2020 and 2025. The company expects its revenues to rise to $3.67 billion by 2025 and is forecasting EBITDA margins at 32% that year. The bank charter could lead to more upside for the company’s financial projections.

Should you buy SOFI stock?

The fintech industry is among the most promising investing themes for the next decade and SOFI looks like a good play to ride the fintech wave given its diversified operations and a strong management team. The stock looks among the best names to play the fintech story and is a good long-term investment.

Currently, SOFI stock trades at an NTM (next-12 months) EV-to-sales multiple of just above 5x. The valuation multiples look quite tempting despite all the noise ranging from loan moratorium extensions to rate hikes. It might be worthwhile buying the dip in SOFI stock today, especially if you are a long-term investor.

Buy SOFI Stock at eToro from just $50 Now!