Will SoFi Become a $30 Stock Again or Keep Languishing Below $20?

Over the last couple of years, SoFi has invariably traded above its mean target price, but the recent consensus target price of $26.88 is roughly 51% higher than current levels. Sell-side analysts have been apprehensive of SoFi’s valuation, and brokerages give it a consensus “Hold” rating. However, last month, Citizens JMP and JPMorgan both upgraded the stock to an “Outperform” rating while raising their respective price targets to $30 and $31.

To be sure, the fall in SoFi stock is not totally unwarranted, as there are genuine concerns over credit quality. However, I believe the selloff has gone a bit too far, as SoFi has been diversifying away from the lending business and has doubled down on its capital-light tech platform and financial services business. Moreover, the company has stringent credit standards, and in Q4, the weighted average income of its personal loan borrowers was $158,000 with a weighted average FICO score of 746.

In hindsight, SoFi nearly perfectly timed its capital raise, and the company now has the balance-sheet strength to withstand the current turmoil. SoFi is among the cleanest growth stories out there and added over 1 million new members in Q4, closing the year with 13.7 million members. For context, that figure is more than 20 times its member count at the end of 2018. The growth flywheel is far from over, with the company guiding for the metric to rise by at least 30% this year.

SoFi’s valuations have taken a beating in the selloff, and SOFI stock trades at a forward price-to-earnings (P/E) multiple of 30.2 times, which looks quite attractive considering the 54% and 33% earnings growth the company is expected to witness in 2026 and 2027, respectively.

While SoFi trades below the levels at which I started buying shares last year, I remain constructive on the stock and have been buying the dip. Of course, SOFI stock could remain volatile in the short term amid the evolving situation in the Middle East, and more downside cannot be ruled out. But I believe the crash is a good opportunity to own this fintech name, particularly for those investors who missed out on the rally in the preceding three years. SoFi has a chance of becoming a $30 stock by the end of next year, and I find its risk-reward quite attractive at these levels.

On the date of publication, Mohit Oberoi had a position in: SOFI. All information and data in this article is solely for informational purposes. This article was originally published on Barchart.com