Shares of fintech powerhouse SoFi Technologies (NASDAQ:SOFI) have witnessed some rough waves this year. Still, SOFI stock is receiving a mid-week pop today courtesy of an optimistic analyst view. With the underlying company expanding its products and services, SoFi could rise above the muck.
Needham analyst Kyle Peterson just initiated coverage of SOFI stock with a “buy” rating. In addition, the expert has a $10 price target for shares. Peterson wrote in a note to investors:
“We view SoFi as a long-term winner in the digital lending/neobank space, largely due to its focus on prime and super-prime consumers and possession of a full banking license, which we believe provides the company superior unit economics compared to other consumer finance platforms that focus on lower income borrowers and/or lack a banking license.”
Specifically, Peterson emphasized SoFi’s lending business, which covers personal loans, mortgages and student-loan refinancing products, among other categories. Further, SoFi’s banking charter should extract “efficient and sticky funding,” per MarketWatch.
Expanding the Value Chain Is a Huge Catalyst for SOFI Stock
While SOFI stock certainly generates plenty of attention due to its lending business, Peterson also spoke to the firm’s technology products like Galileo. In particular, SoFi’s Galileo platform “provides services to other fintech companies while letting SoFi benefit from greater vertical integration,” per MarketWatch.
If that wasn’t enough, SoFi has also entered the artificial intelligence (AI) space through loan underwriting and card issuance. The Needham analyst noted:
“We view these businesses as the crown jewels within SoFi, given their higher-growth nature (20%+), lack of capital intensity, and opportunities they provide to scale efficiently into new products or geographies.”
The expansion of the value chain — which natively benefits the top line — shouldn’t negatively impact the bottom line for SoFi, either. In fact, Peterson said that the firm’s core lending business is how it has been able to reach GAAP profitability.
Why It Matters
Needham’s bullish rating has helped invigorate sentiment today, but SOFI stock still lacks conviction among Wall Street analysts overall. Part of the hesitation centers on the lack of forward progress. For the past five years, shares are down more than 27%.
On the date of publication, Josh Enomoto 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.
