In an environment of easy credit and bountiful liquidity, people tend to be risk-on and companies will act to fulfill that demand. A new space of publicly traded fintech firms came to prominence over the last couple of years, including the personal finance firm SoFi Technologies, Inc. (SOFI). Offering several products in a new-age non-banking format, the stock had initially seen success on the open market. However, the risk-on atmosphere appears to be changing.
Updating his hypothesis on the stock’s outlook is Dan Dolev of Mizuho Securities, who highlighted possible projections for SoFi regarding its completed and outstanding warrant redemptions. The company announced about $95 million in raised capital by issuing 15.2 million shares of stock. Thus far, investors have yet to respond kindly to the news of their diluted shares.
Dolev rated the stock a Buy, but considerably lowered his price target to $17 from $30. This new target currently represents a possible 12-month upside of 28.79%.
While SoFi’s upcoming earnings are expected on February 9, 2022, Dolev incorporated a note from the company’s previous call for Q3. He quoted SOFI’s management, writing that they had committed 70% of every “incremental revenue dollar” to scale their business. The company clearly intends to heavily invest the fruits of its labor back into new initiatives and innovations, a strong long-term indicator.
Management also added that SOFI had brought in “record results,” and that they intend to steer the firm toward sustainable growth.
For investors looking at near-term gains, they may be out of luck. Issuing hefty amounts of shares can typically bring with it pressure and volatility, and not necessarily the fun kind.
In addition to its long-term plan of reinvestment back into its business, SOFI must continue to perform. The firm must “attract new customers and retain existing ones with their additional product offerings,” wrote Dolev. He mentioned a possible risk factor of increased U.S. regulatory oversight on its debt-related products. Considering the Fed is particularly wary of inflation, cutting back on credit could eventually come into question.
On TipRanks, SOFI has an analyst rating consensus of Strong Buy, based on 6 Buy and 2 Hold ratings. The average SoFi Technologies price target is $22, indicating a potential 12-month upside of 66.67%. SOFI closed trading Friday at a price of $13.20 per share.
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