There’s a wave of optimism sweeping through the markets and it’s boosting SoFi Technologies’ stocks, signaling a potentially promising turn of events for the leading online banking giant. Known for its robust offerings in savings, checking, and loans (including credit cards and student loans), SoFi has experienced its fair share of turbulence, but that’s about to change.
Over the past year, investors were hesitant to rally behind SoFi, thanks to the student loan forgiveness plan and COVID-induced delayed payment programs, not to mention economic uncertainties and a sluggish stock market. From a peak above $28 in February 2021, SoFi’s stock plunged to below $5 just last month, marking an over 80% drop.
However, as the old adage goes, every cloud has a silver lining. SoFi’s stocks are on the move, revealing an upward trend that all savvy investors should keep a close eye on.
Despite lingering economic uncertainties and a still relatively high inflation rate, a major cause of SoFi’s weakness last year is set to fade away. Starting in October, millions of student loan borrowers who had previously suspended their payments will be back to their monthly bills. This comes alongside interest that will start accruing again on September 1st.
Previously, in an attempt to halt forbearance, SoFi sued the Department of Education, claiming that forbearance had cost them $300 million in revenue since March 2020. However, after a bipartisan debt ceiling deal that ended the policy earlier this month, the lawsuit was withdrawn.
In another potential win for SoFi, the Supreme Court is reviewing President Biden’s student loan forgiveness plan, which aimed to erase up to $20,000 in student loan debt for individuals earning less than $125,000. The chances seem to be tipping against the plan’s approval, with a decision expected later this summer.
Investors are starting to recognize the potential resurgence of SoFi’s student loan business. With an increasing demand to refinance student loans, the company could see a boost in future revenue and profit growth. This optimism has sent SoFi’s shares more than doubling since mid-May. Those who bet against SoFi are now racing to cover their positions.
Notably, this increase happened with high trading volumes. SoFi’s trading volumes have been consistently above average since the end of May, with shares rising in nine out of the past ten trading days.
Looking ahead, lenders may face increased delinquency and default rates due to pressure on consumer budgets once student loan forbearance ends. However, SoFi’s CEO, Anthony Noto, remains undeterred. The former Twitter COO, who joined SoFi in 2018, has been scooping up SoFi shares as they dropped, amassing a total of nearly 6.5 million shares.
This vote of confidence, paired with the company’s impressive revenue growth – up 72% to $608 million last quarter – is quite promising. SoFi’s future stock performance will likely hinge on the economy evading a deep recession and the Supreme Court dismissing student loan forgiveness.
Regardless of these challenges, the recent breakout of SoFi’s stock suggests it might be wise for investors to seize opportunities on down days. For entrepreneurial and investment-savvy minds, this could be a turnaround tale worth your attention.