Sofi Stock Forecast 2023: SOFI Draws Bullish Momentum, Time to Buy?

Sofi Stock Forecast 2023: SOFI Draws Bullish Momentum, Time to Buy?

Sofi Stock Forecast 2023: The momentum prediction is bullish and the trade recommendation is Buy for the next trading day.

In Q3 FY 2022-23, results for which were announced on October 27th, revenue shot up 56% to $419 million YoY. It was Sofi’s first quarter of positive GAAP net income of $25 million. Lending adjusted net revenue grew 46% to $251 million in Q3.


Latest SOFI Stock Price

It is a well-known fact that technology stocks have taken it on the chin over the past year. For example, Nasdaq 100, dominated heavily by technology stocks has fallen 33% in the past year. Still, technology stock is a huge spectrum and fintech is also one prominent emerging part of this league.

The story of fintech stocks is no different from technology stocks, maybe they might hit even harder. For example, Upstart stock has crashed 94% in the last year and has proved to be a disaster for investors. Similarly, SoFi Technologies Inc stock has given a negative 77% return in the same period.

For 2023, we need to have a fresh look at fintech stocks as the macroeconomic environment is on the verge of a major shift. In this article, we will discuss the bull and bear case of SOFI stock keeping 2023 in perspective.

Sofi Stock Technical Analysis

Sofi Stock price has been on a downtrend since the beginning of August 2022. However, since mid-November, the price fell again and from trading above $6, SOFI Stock price fell close to $4.

In the below chart, the two bands of Bollinger bands have created a massive gap which indicates that the SOFI stock price is highly volatile.

The SOFI stock price tested the moving average twice. The price retreated once. However, looking at the chart, SOFI formed two bottoms therefore, on the next trading day, the price of SOFI stock is predicted to rise.

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Sofi Stock Technical Analysis (RSI)

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The RSI of SOFI stock is drawing a bullish form. It faces resistance at 49.99 but with buyers taking over, RSI will breach this resistance on the next trading day. Sofi stock has enough potential to rise before it enters the over-purchased territory.

Current support for SOFI is $4.37 and the resistance is $4.71.

The momentum prediction is bullish and the trade recommendation is Buy for the next trading day.

Sofi Stock Forecast 2023: Bull Case

  • Bank Charter is the new ray of hope- Sofi finally managed to get a bank charter after a lengthy process that allows Sofi to gather and hold deposits and then use them to fund the loans. It also makes way for loan origination in-house which will save money and time for its customers.

It was the first quarter of Sofi bank and it contributed $2.7 billion in deposits. Now management has to decide what is the way forward for these deposits and loans originated.

What it does is that it gives much more flexibility to the management to extend their loan originations. As a result, their revenue is growing more than 50% in recent quarters. In Q3 FY 2022-23, results for which were announced on October 27th, revenue shot up 56% to $419 million YoY. It was Sofi’s first quarter of positive GAAP net income of $25 million. Lending adjusted net revenue grew 46% to $251 million in Q3.

This quite positive set of results coincided with the bank charter being functional giving Sofi that extra edge over its peers like Upstart Holdings Inc. Therefore, the Bank charter can lead to a high magnitude of revenue and customer count growth in 2023 which will be very positive for SOFI stock.

  • Results Speak better than words – A decade earlier, Sofi was only a student loan refinancing company that has gradually diversified its business and lending products. As a result, Sofi has not only seen growth in revenue but also growth in the number of new members being added to its platform.
Sofi Stock Forecast 2023

*Source: Investor’s presentation: Q3 FY 2022-23 Results

The image above shows the growth of new members on the Sofi platform. This is more important because Sofi was hit very hard by the Covid pandemic.

Sofi Stock Forecast 2023

*Source: Investor’s presentation: Q3 FY 2022-23 Results

The number of new products added is increasing every quarter and that is attracting new members. This growth may deaccelerate, but it is still much higher than its peers and that makes Sofi a leader in its niche.

  • No further extension of student loan moratorium– Since the Covid pandemic, the Biden administration has given an extension to student loans on more than seven occasions. It has also forgiven $10,000 debt to borrowers that make less than $125,000 per year. These decisions have largely affected Sofi negatively.

However, the positive news is that the extension period is now ending in December 2022, with very less chance of further extension. So, beginning in 2023, student loan refinancing revenue can be back on Sofi’s balance sheet and it can be a major boost for the company heading into 2023.

Also Read: Sofi Stock Forecast 2022

Sofi Stock Forecast 2023: Bear Case

  • Lack of Transparency with the future of loans- Bank charter is positive news for Sofi, but the management is very opaque regarding the strategy for the bank charter. It said that it plans to hold loans for six months, collect the recurring interest incomes and then sell the loans to investors.

This little tweak in the accounting rule enables Sofi to hold a very less amount as a provision for credit losses. For example, at the end of the third quarter, Sofi had $11.2 billion of loans on its balance sheet, whereas the provision amount is only $39.4 million, or 0.35% roughly as against 5-6% in normal bank practices. Therefore, Sofi is reaping the benefits of a bank, but not complying with the liabilities of the same.

Going into 2023, Fed may instruct Sofi to maintain proper credit provisions and that can significantly reduce the profitability of the company. On the contrary, if the US is heading into recession, investors may lose the appetite to absorb these loans and Sofi may be forced to show them permanently on its balance sheet.

  • Exceptional growth in personal loans, but that comes with inherent risk-  Although, Sofi loan originations is increasing in recent quarters, its negative point is that it is witnessing exceptional growth in personal loans which has more probability of defaulting compared with student loans or housing loans.

Sofi, although serves a very high-quality customer base and its loan portfolio, has a weighted FICO score of 748, but demand for a personal loan is depleting as reported by its peer LendingClub in the recent quarter.

Going into 2023, house loan originations will still be dull due to very high-interest rates and Sofi will get into trouble if personal loans are not sold to investors as expected.

Sofi Stock Forecast 2023: Is it a Buy for 2023?

In conclusion, 2022 has not been the year for Sofi and its stock price has fallen 67% since the start of 2022. Although the bank charter has provided an edge to Sofi, management does not have a clear strategy for it going into 2023.

No doubt that Sofi did trade at very premium valuations in the past. Still, the recent fall has cooled the valuations for SOFI. Now it trades at 3.25 times sales which is much lower than 14.45 in Q2 2021.

However, it is to be remembered that earnings per stock for Sofi is still negative despite increasing revenue in every quarter. Therefore, 2023 can be the turning point in the history of Sofi and net earnings can come into positive territory for the first time.

If an investor has some risk appetite, SOFI must be in his portfolio for 2023 to witness the awesome growth story for this fintech stock.

Sofi Stock Forecast: Price Target

Overall Average$8.2
Bank of America$9
Mizuho$8
Credit Suisse$8.5
Morgan Stanley$7.5
Piper Sandler$8

SOFI Stock Forecast Today

Overall OutlookPartially Negative
1. Market's WisdomNeutral
1a. Market DataPartially Positive
1b. Technical RecommendationSell
2. Crowd's WisdomPartially Negative
2a. Social Media BuzzLower
2b. Social Media SentimentNeutral

Note: Crowdwisdom360 collates Predictions and data from all over the net and has no in-house view on the likely trends in the Stocks or Crypto Coins. Please consult a registered investment advisor to guide you on your financial decisions.

Vineet Agarwal 

Vineet

Vineet

Vineet Agarwal is a trained technical analyst and avid stock trader. A graduate from a Top Technology Institute, Vineet carries out extensive technical and secondary research for this authored stock forecasts.

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