SoFi technology‘ (Nasdaq: SOFI) Personal loan (or PL) origination remains moderate, raising concerns about the company’s future growth. But Mizuho Securities analyst Dan Drev isn’t too concerned about that. Dolev he is bullish about SoFi. However, his $6 price target suggests a possible 10.18% decline.
It’s worth noting that the extended moratorium on student loan payments and the high interest rate environment have hit SoFi’s student loan and mortgage originations. However, tremendous growth in personal loans is helping SoFi offset the downside. Slower personal loan originations could slow SoFi growth.
For example, SoFi personal loan originations grew 151% in Q1 2022. This growth rate slowed to 91% he in the second quarter. Meanwhile, production volumes in Q3 and Q4 2022 increased by 71% and 50%, respectively2.
Consistently modest personal loan origination volume growth has raised concerns about demand. However, this may be due to the company’s strict underwriting standards and increased coupons due to higher rates.
SoFi borrowers have higher incomes and higher FICO scores. On its fourth quarter conference call, SoFi announced that the weighted average income of its personal loan borrowers was $165,000. Additionally, the weighted average FICO score is 747.
Focusing on personal loan originations, Dolev said: This breaks an upward trend in originations that lasted about two years from his low of $614 million in Q4 2020 to his high of $2.8 billion in Q3 2022. ”
However, “PL growth is not linear, so it should be less of a concern,” he added.
SoFi Buy or Hold?
Wall Street is cautiously optimistic about SoFi stocks. 7 buys and he has 5 hold recommendations with a medium buy consensus rating. Additionally, the analyst’s price target of $7.17 suggests a potential upside of 7.34%.
Conclusion
Although personal loan originations have slowed, SoFi management remains optimistic and expects its high-margin personal loan business to see modest growth in 2023. On the other hand, the company intends to maintain strict underwriting standards, which is a good thing as it leads to solid credit performance.
In the first quarter of 2023, SoFi expects to achieve adjusted net revenues of $430 million to $440 million, representing year-over-year growth of 34-37%. Meanwhile, SoFi’s balance sheet remains strong, with ample cash and liquidity. In addition, regulatory capital and leverage ratios remain high.
Disclosure
The views and opinions expressed herein are those of the authors and do not necessarily reflect those of Nasdaq, Inc.
[ad_2]
Source link
