1 Wall Street Analyst Thinks SoFi Stock Is Going to $14. Is It a buy at $7.38?
When does an underperforming stock become undervalued?
When talking about slumping next-generation financial services company SoFi Technologies (NASDAQ: SOFI), the answer is "now," at least according to one market professional. In fact, this prognosticator is suggesting the stock could nearly double in price in the next 12 to 18 months.
Is that expectation realistic?
90% gains in a year, one pundit believes
In mid-March, Truist Financial Securities analyst Andrew Jeffrey said he felt compelled to reiterate his buy recommendation on SoFi at a price target of $14 per share. This is a 90% upswing from the fintech's latest closing price of $7.38.
The concern lately with SoFi -- and one of the key reasons for its recent, post-earnings share price weakness -- is the fintech's capitalization levels. Earlier in March it floated $750 million worth of convertible notes in a private placement to shore up its finances. The notes mature in 2029; the company didn't specify the interest rate for this float (a likely impetus for an investor sell-off).
That took some bloom off the rose for SoFi. Mere days before the convertible notes issue was announced, the company unveiled fourth quarter and full-year results packed with growth in crucial areas. Revenue zoomed 35% higher year over year, while the customer count leaped 44% year over year at the end of 2023.
SoFi has high potential at a low price
I think the market is making too much of the convertible notes issue. Yes, it either adds to the company's debt load, dilutes its shareholders, or both. However, young companies like SoFi often sacrifice profitability for growth, a strategy that can necessitate new financing.
In the long term, SoFi has excellent potential. Like many smart tech-focused companies it's building out its ecosystem, in a way that should continue to attract customers and make them more active users. That all-important profitability should come soon, meanwhile, as the average analyst estimates for net income this year and next are well in the black. Like Jeffrey, I'm convinced this stock is quite the bargain at its current level.
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Eric Volkman has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Truist Financial. The Motley Fool has a disclosure policy.
1 Wall Street Analyst Thinks SoFi Stock Is Going to $14. Is It a buy at $7.38? was originally published by The Motley Fool
