SoFi (NASDAQ:SOFI) stock slipped Thursday after the government announced it would forgive up to $1.2 billion in additional student loans. Indeed, the news snapped SoFi’s seven-day winning streak in the stock market as investors considered how the forgiveness policy would affect the lending company.
So, what exactly does this mean for SoFi?
Well, if its stock price movement is any indicator, it may be a bit troublesome for SoFi’s bottom line. SoFi seemingly can’t catch a break regarding student loans.
The company was stalled through most of the pandemic as the student loan moratorium forced the company to explore alternative revenue pathways, like expanding its real estate loan business. Many analysts assumed that once the pandemic ended and the moratorium was lifted, SoFi would once again enjoy the fruits of its student loan business.
Unfortunately, the Biden administration has repeatedly implemented student loan forgiveness packages, curbing SoFi’s once-largest revenue streams.
Analysts are somewhat divided on SOFI stock. While the company has found other ways to earn aside from student loans, some analysts believe the company will face headwinds related to the worsening credit quality of its balance sheet.
“In the last two consecutive quarters, SoFi has shown improvement in their financials, achieving GAAP profitability as promised by management last fall. Promises made, promises kept,” said Seeking Alpha analyst Noah’s Arc Capital Management.
“Despite this positive shift, shares continue to face downward pressure. This is likely caused by speculation over potential loan defaults and deteriorating credit quality within SoFi’s asset portfolio. I believe this speculation is incorrect and misguided,” they said.
SOFI Stock Slides on Student Loan Forgiveness Announcement
Despite the company’s recent week-long win streak on the stock market, SOFI stock is still down for the year. Indeed, SOFI is in the red about 22% year-to-date, even as the S&P 500 is up 16.25% over the same period.
SoFi also has a high short interest at 18.51%, suggesting many investors believe the stock will continue to tumble going forward. In fact, SoFi was listed among Oppenheimer’s “Top Sell” ideas.
On the date of publication, Shrey Dua did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
On the date of publication, the responsible editor did not have (either directly or indirectly) any positions in the securities mentioned in this article.
