SoFi's stock has faced very negative sentiment, but that seems to be softening

By Emily Bary

Shares picked up their second upgrade of the week

Wall Street has been warming up a bit more to SoFi Technologies Inc. shares this week, as they just picked up their second upgrade of the past few days.

Granted, analyst Timothy Switzer of Keefe, Bruyette & Woods lifted his rating to market perform from underperform in his report Thursday afternoon, so it wasn't a bullish endorsement like an upgrade from Needham earlier in the week.

See more: Here's why SoFi's stock racked up a rare bullish call

But Switzer thinks SoFi shares (SOFI) have likely fallen far enough after a 24% drop this year. "[W]hile we continue to have questions about the sustainability of earnings/capital over the long-term, we believe the share price decline and recent capital raise remove much of the risk of negative catalysts to investors over the near-term," he said in his report.

SoFi announced in early March a convertible-note offering that fueled concerns about dilution for current shareholders. But on the positive front, SoFi's moves to raise capital and pay down debt help the company's earnings prospects, according to Switzer. SoFi also gave itself more time to originate loans without the need to significantly increase its sales activity.

In particular, by lowering the possibility that it will need to seek a meaningful buyer of its loans, SoFi is reducing "the near-term risk of some key negative catalysts investors have been focused on."

SoFi shares were up fractionally in premarket action Friday.

Don't miss: Why this SoFi bull spies 'opportunity in others' fear'

"We also note that investor sentiment has become increasingly negative [on a year-to-date basis], partially limiting downside risk in our opinion," Switzer wrote. He flagged that short interest represents 23% of the float, whereas it was only 13% at the beginning of 2024. The current percentage is close to peak levels, he said.

SoFi's stock has a days-to-cover ratio of 2.87, meaning it would take an estimated 2.87 days to cover all of its open short positions, based on average trading volumes. That compares with 1.00 days for Tesla Inc. shares (TSLA), and 5.18 days for Upstart Holdings Inc.'s (UPST) heavily shorted stock.

Read: Block isn't doing enough to win over Gen Z, this new bear warns

-Emily Bary

This content was created by MarketWatch, which is operated by Dow Jones & Co. MarketWatch is published independently from Dow Jones Newswires and The Wall Street Journal.

(END) Dow Jones Newswires

04-05-24 0841ET

Copyright (c) 2024 Dow Jones & Company, Inc.