SoFi (SOFI) Stock Soars 18% on Approval to Become a National Bank, Analyst Raises Price Target

January 19, 2022 5:59 AM EST
Get Alerts SOFI Hot Sheet
Price: $7.75 +7.19%

Rating Summary:
    8 Buy, 5 Hold, 0 Sell

Rating Trend: = Flat

Today's Overall Ratings:
    Up: 4 | Down: 15 | New: 7
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Shares of SoFi Technologies (NASDAQ: SOFI) are trading over 18% higher in pre-market Wednesday after the company announced it received approval from the Office of the Comptroller of the Currency (OCC) and the Federal Reserve to become a Bank Holding Company.

SoFi earlier acquired Golden Pacific Bancorp in a bid to become a national bank, with the acquisition expected to close next month.

“This incredible milestone elevates our ability to help even more people get their money right and realize their ambitions,” said Anthony Noto, CEO of SoFi.

“With a national bank charter, not only will we be able to lend at even more competitive interest rates and provide our members with high-yielding interest in checking and savings, it will also enhance our financial products and services to ensure they efficiently meet the needs of our members, business partners, and communities across the country, while continuing to uphold a high bar of regulatory standards and compliance.”

Rosenblatt analyst Sean Horgan raised the price target to $30.00 per share from the prior $28.00 on the Buy-rated SoFi stock following the news.

“We expect consensus estimates to move substantially higher as models are revised to incorporate the benefits of the bank charter. As a result of the news, our adj. EBITDA estimate for 2022 moves to $235mn (vs. consensus of ~$175mn), with potential for upside given a degree of conservatism in our assumptions. We view this catalyst as the primary driver of SOFI's expected outperformance over the next 12 months,” Horgan said in a client note.

Horgan has a Top Pick designation on SoFi for 2022 “given both the direct benefits (i.e., lower cost of capital, increased NIM) and indirect benefits (i.e., rising interest rates) of becoming a national bank.”

Mizuho analyst Dan Dolev reiterated a Buy rating and a $17.00 per share price target as he sees the milestone as a “significant positive catalyst.”

“While having a bank charter license helps improve credibility and trust, it first and foremost should help lower SoFi's cost of capital. We estimate the benefit could potentially be $200-300mn of incremental adj. EBITDA, mainly due to lower funding costs. While handling crypto as a bank holding company will likely require some disclosure changes, we believe these issues are fully solvable and should not adversely impact SoFi's future product capabilities. We expect a positive stock reaction,” Dolev wrote in his report.

SoFi stock price closed at $12.06 yesterday.

By Senad Karaahmetovic | [email protected]

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