Why this SoFi bull spies 'opportunity in others' fear'

By Emily Bary

Truist thinks the fintech company is well capitalized and could come to gain new appreciation on Wall Street

SoFi Technologies Inc.'s stock continues to find defenders in the wake of the financial-technology company's capital-raise announcement last week.

"Our view is the central debate on SoFi is around credit and potential read-throughs to capitalization," Truist Securities analyst Andrew Jeffrey wrote Tuesday, but he thinks the company is in a good spot. SoFi looks well capitalized, in his view, and the company's recently announced convertible transaction should give it more of a buffer.

From Jeffrey's perspective, SoFi (SOFI) is sitting on "ample liquidity" that will allow it to expand its book of loans. The company has seen "robust" generation of net income and has a $2 billion purchase commitment from BlackRock Inc. (BLK), he noted.

Bears also seem to be doubting that SoFi will be able to keep life-of-loan losses in the 7% to 8% range, but Jeffrey feels more encouraged about that point as well.

"Although nearly impossible to substantiate either side of this argument until/unless management provides visibility into static pool performance, our conversations with SoFi provide confidence that loan performance is tracking to expectations," he wrote.

He expects that Wall Street will soon get more information on the credit side, once loan growth slows down and recent loan vintages "season."

Jeffrey expects that investors will find new appreciation for SoFi shares as non-lending parts of the business continue to become greater earnings contributors, a factor he thinks will make Wall Street rethink how the stock should be valued.

"We assert balancing profitable lending growth while steadily boosting non-lending profit is a formula for sustained outperformance," he said, while reiterating his buy rating and $14 target price in a report to clients titled: "We See Opportunity In Others' Fear."

SoFi shares ended Tuesday's session off 2.6%, and they're down nearly 13% since the company announced its capital raise on March 5.

Read: SoFi's stock had a historic drop. What if it was misguided?

-Emily Bary

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03-12-24 1636ET

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