SoFi sees ‘light at the end of the tunnel’ on student loans, analyst says in update


By Emilie Bary

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Shares of SoFi Technologies Inc. rose more than 5% on Wednesday as Bank of America turned bullish on shares of the neo-banking firm.

Bank of America’s Mihir Bhatia upgraded the stock to buy from neutral, writing that the name has “catalyst potential” given upcoming opportunities in student loans as well as potential returns from recent moves. marketing.

SoFi (SOFI) was facing an ‘overhang’ on student loans as President Joe Biden continued to push back the timing of a moratorium on loan repayments, but he announced in late August that the government would forgive $10,000 of loans to borrowers earning less than $125,000. one year and end the pause in payments at the beginning of the new year.

See more: Biden forgives $10,000 in student loans, $20,000 for Pell grant recipients

The move suggests a “light at the end of the tunnel” for SoFi, according to Bhatia.

“Student loan refinance is SOFI’s most profitable product and loan forbearance has been exceeded for SOFI both fundamentally (as demand has been stalled for a high incremental margin product), as well as sentiment , as investors were unsure when demand would pick up,” he wrote. .

Greater clarity on the government’s plans “should set the stage for student loan applications to pick up at the end of 4Q22 as borrowers begin receiving payment notices from loan services,” Bhatia said.

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Additionally, he thinks SoFi could leverage its marketing around the National Football League, as the company’s name sits atop the Los Angeles stadium where the Rams and Chargers play their games. SoFi is also working on a branding campaign with Chargers quarterback Justin Herbert, he said.

“Our analysis indicates that interest in the SOFI brand increases on Sundays, particularly when Los Angeles teams are playing home games,” Bhatia wrote.

SoFi shares have gained 4% in the past three months, although they have fallen 61% over a 12-month period. The S&P 500 is up 4% in the past three months but down 12% year-over-year.

-Emily Bary


(END) Dow Jones Newswire

09/14/22 1944ET

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