SoFi stock forecast: Is social finance the future of banking?

SoFi Technologies Inc. (SoFi), or Social Finance, came to market in June 2021, offering customers a chance to “get your money right” using its financial products app. 

As the pandemic saw customers move online and away from traditional banks, SoFi was well placed to benefit, reporting 75% year-on-year member growth over the course of 2021. 

In January 2022, SoFi received long-awaited regulatory approval to become a National Bank – a move that will allow the company to broaden its suite of financial products. 

But, SoFi has yet to make a profit, and a stock sell-off in November 2021 rocked its share price. With full-year results due for release on 1 March 2022, what factors are shaping the SoFi stock price prediction in 2022?

A short and volatile history

SoFi first came to market in June 2021, the product of a special purpose acquisition company (SPAC) merger with Social Capital Hedosophia.

The new company’s aim was to provide a one-stop shop for financial services. SoFi operates across three business segments: lending (covering student loan refinancing, personal loans and home loans); a technology platform; and financial services, including SoFi Invest, SoFi Money and credit cards.

Since going public, SoFi stock has been volatile. From an opening day price of $22.65, it briefly moved to an all-time high in early June 2021, hitting $24 within the first few days of trading. 

In August 2021, the company posted its first earnings report as a publicly traded company, reporting a mixed bag of results.

Although SoFi exceeded second-quarter net revenue and earnings guidance, it reported a loss per share of $0.48, far below the consensus earnings per share (EPS) estimate of -$0.07. The share price fell 14% to $14.99 on the back of those results – a 40% drop from its earlier peak.

The SoFi Technologies stock price tumbled again when the company announced a secondary offering on 15 November 2021. This saw a number of original shareholders, including Softbank, sell a proportion of their shares. SoFi stock entered a bear run. The share price fell from $22.76 on 15 November 2021 to $13.09 by 14 January 2022 – a drop of over 40%.

In recent SoFi stock news, the company announced that regulators had approved its application to become a Bank Holding Company through its acquisition of Pacific Bancorp Inc. This merger was officially completed on 2 February 2022. The new bank was named SoFi Bank, National.  

Market response was mixed. The share price jumped from $13.09 to $15 in the days after January’s regulatory approval was announced but has fluctuated significantly since, reaching a record low of $11.10 on 31 January 2022. The SoFi stock price is currently (21 February) trading at $11.39.

SoFi stock analysis: A technical view

The relative strength index (RSI) for SoFi was neutral at 41.16 at the time of writing 

(21 February). A move to an RSI below 30 could signal that SoFi stock is oversold and undervalued. Although SoFi shares pushed below this threshold on 18 February 2022, the current level does not suggest another upward breakout. 

Though RSI pushed above 70 earlier in the month, suggesting the stock was overbought and overvalued, RSI figures no longer signal that the price is facing downward pressure. 

Bank-to-be

On 2 February 2022, SoFi completed its acquisition of Golden Pacific Bancorp, a California-based community bank. This acquisition was a key strategic step on SoFi’s path to obtaining a national bank charter, which was approved by the Office of the Controller of the Currency (OCC) and the Fed on 18 January 2022.

This acquisition will allow SoFi to accept deposits and make loans using member deposits, rather than via costlier non-bank funding routes. 

These funding arrangements will leave SoFi “able to lend at even more competitive interest rates and provide our members with high-yielding interest in checking and savings”, said SoFi CEO Anthony Noto in a press release. 

Stuck in a loop 

With this acquisition, SoFi aims to offer improved features to members, including an automated savings function and an ‘industry-leading’ annual percentage yield of up to 1%.

Key to SoFi’s long-term strategy is the idea of a “financial services productivity loop”. The idea is that customers using the company for one service, for example, student loans, will be more likely to use it for another, such as credit cards, creating a “flywheel” of growth.

According to Sofi’s third-quarter results, its financial services division was its least successful business segment, generating a contribution loss of $39m over the quarter. 

SoFi hopes that customers using services like SoFi Money will be more inclined to ‘cross-buy’ and use its other products. The results look promising. In a November earnings call, CEO Anthony Nato revealed that these products accounted for 73% of all cross-buying.

Regulatory burden

Although the national bank charter may provide SoFi with a significant opportunity, it also represents an increased regulatory burden.

A February press release contained a cautionary statement on the “increased complexities with compliance that accompany regulation as a bank holding company”, and these include strict capital conditions. 

OCC stipulated that “the Resulting Bank shall have initial paid-in capital of no less than $750 million contributed in cash” in SoFi’s approval document. This could have implications for the firm’s bottom line. 

Fickle fundamentals

SoFi recorded a $224m net loss in 2020. The first three quarters of 2021 saw $370m added to that figure. Full year and Q4 results are due for release on 1 March 2022.

Mixed Q2 results rocked the SoFi share price in August 2021. The question remains whether investors are about to see a similar effect again.

SoFi stock forecast for 2022

Since it came to market in 2021, eleven analysts have initiated coverage on SoFi. As of 21 February, Wall Street analysts rated SoFi a consensus ‘buy’, with eight ‘buy’ ratings, three ‘hold’ and zero ‘sell’, according to data from MarketBeat.

SoFi stock price targets for the next 12 months ranged from a low of $16 to a high of $30. The analysts’ average share price target sat at $20.36, a 78.79% potential upside on the current (21 February) SoFi stock value. 

On 14 January 2022, Morgan Stanley analysts lowered their SoFi share price target from $22 to $20, a 54.08% upside on the report date share price, and issued an ‘overweight’ rating.

On 18 January, SoFI announced that its National Bank charter had been approved, triggering a flurry of analyst activity. 

Analysts at Bank of America and Wedbush both initiated coverage on the stock, issuing bullish ‘buy’ and ‘outperform’ ratings, respectively. Rosenblatt Securities reacted optimistically to the announcement, issuing a ‘buy’ rating, and boosting its SoFi stock price target from $28 to $30 – a 148.76% upside on the report date share price.

But not all analysts shared this sentiment, with Mizuho lowering its SoFi price target from $30 to $17 – a -43.33% revision, but still a 28.8% upside on the report date (18 January) share price. 

Goldman Sachs analysts were neutral on the stock, initiating coverage on 18 January with a ‘neutral’ rating and $16 price target. 

More recently, analysts at Oppenheimer significantly reduced their SoFi share price target on 9 February, decreasing it from $28 to $18. They were not entirely bearish, issuing an ‘outperform’ rating on the stock. And that revised target price represents a 48.39% upside on the report date share price.

Note that analysts’ forecasts can be wrong. Forecasts shouldn’t be used as a substitute for your own research. Always conduct your own due diligence before investing. And never invest or trade money you cannot afford to lose.

Longer-term SoFi stock price forecast (2025-2030) 

Though analysts rarely provide long-term stock forecasts, Wallet Investor uses an algorithm-based service to generate longer term SoFi share price predictions. 

On 21 February, its SoFi share price forecast suggested that the price could rise to $12.86 by July 2022.

Wallet Investor’s SoFi stock price forecast was more bearish as we look towards 2030. The site’s predictions saw the SoFi expected stock price dipping to $11.85 in February 2023. 

Wallet Investor’s SoFi stock projection then saw the price drop to $10.86 by February 2024, $9.29 by February 2025, $8.12 by February 2026 and $6.95 by February 2027. 

Note that algorithm-based predictions are often wrong. Past performance cannot guarantee future results. WalletInvestor’s forecasts use historical price movements to predict future prices. Forecasts shouldn’t be used as a substitute for your own research. Always conduct your own due diligence before investing. And never invest or trade money you can't afford to lose. 

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