It’s no surprise that SoFi Technologies (NASDAQ:SOFI) stock has performed poorly as of late. This month’s banking crisis has considerably pressured financial stocks.
Add in the surface-level similarity between SoFi, and SVB Financial (NASDAQ:SIVB), and it makes even more sense why the market has gone from bullish to bearish on shares in this fintech firm/neobank. Yet while the market has changed its view, the sell-side community has not.
Analyst sentiment for SoFi remains the same as it was a month ago. None of the analysts covering the stock have changed their view considering recent developments.
In the near-term, there is a disconnect between the analyst community’s view, and the overall market’s view. That may not be the case later this year. Here’s why.
| SOFI | SoFi Technologies | $5.82 |
The Sell-Side Leans Bullish
According to Marketbeat, a great resource for gauging sell-side sentiment, SoFi Technologies currently has a Consensus Analyst Rating of “Moderate Buy.” Out of 12 active analyst ratings, seven rate shares a “buy,” five rate it shares a “hold,” with zero active “sell” recommendations.
As for price targets, the Consensus Analyst Price Target for SOFI stock comes in at $8.42 per share. That represents 46.6% in potential upside relative to current prices, although these price targets vary widely, from $6 per share at the low end, to $13 per share at the high end.
As I mentioned above, there has been zero change to overall sentiment for SOFI considering the banking crisis. In fact, as a Motley Fool commentator has pointed out, just last week, one analyst most bullish on the stock (Mizhuo’s Dan Dolev), reiterated his “buy” rating and $9 per share price target on SOFI.
Providing little-to-no commentary about the banking crisis, Dolev’s reiteration of his analyst rating was based primarily on upbeat statements about SoFi’s various strengths/competitive advantages, made to him by management at a recent dinner meeting.
Why SVB’s Collapse Hasn’t Changed Their View
At first glance, it may seem that it is best to take Dolev’s latest rating on SOFI stock with a grain of salt. After all, focusing entirely on future potential, with little attention to current troubles, seems a rose-colored glasses approach.
That might be the case, if SoFi Technologies was actually facing trouble because of the current mess in banking. Recently, I argued SoFi is not the next SVB. Both firms may be part of the same Silicon Valley milieu, and operate within the same sector, but their business models couldn’t be any more different.
SoFi’s focus on making short-term loans means it has low duration risk in a rising rate environment. The fact it is making these loans with insured individual deposits (which management considers “sticky,” according to Dolev’s latest rating) lowers the risk this digital-first bank experiences the bank run SVB experienced, when its fickle, uninsured deposit cashed out en masse at the first sign of trouble.
In short, it makes sense why the banking maelstrom hasn’t altered Dolev’s view. Or any of the other analyst’s views on SOFI. Instead, their focus remains rightfully on SoFi’s promising future.
The Bull Case Could Prevail on a Not-So-Long Timeframe
The market clearly isn’t in alignment with the sell-side’s current optimism for SoFi. It may take some time for this view to change. However this disconnect works to your advantage.
Yes, just because a stock sells at a discount to its average analyst rating doesn’t mean it will soar to that rating. Here, though, hitting the sell-side’s average price target may be more than attainable.
Based on its last quarterly earnings report, SoFi appears on track to report another year of vigorous growth, and perhaps, a move to GAAP profitability by Q4 2023 (quarter ending Dec. 31, 2023).
As further sign that this bank will meet, or even beat, this year’s guidance could send it up to the high single-digits, following the sell side’s lead with SOFI stock could be a profitable move.
On the date of publication, Thomas Niel did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.