What s next for SoFi stock after Chamath Palihapitiya SPAC merger?
SoFi s [SOFI] stock has received growing levels of retail investor attention on social news platform Reddit recently, but unlike GameStop [GME] and others, don t think of it as just another short-squeeze target.
SoFi (short for Social Finance) Technologies is a US mobile-first fasterloansllc.com/installment-loans-mt fintech firm created in 2011 by four Stanford University students to disrupt the student loans sector. Since then, the company has added a range of financial services, and is now more akin to a digital bank, offering mortgages and personal loans, plus stocks and cryptocurrency trading.
Sofi s stock closed up 12.41% at $22.65 on its first day of trading after going public by merging with Social Capital Hedosophia Corp V, a special purpose acquisition company (SPAC) run by venture capitalist Chamath Palihapitiya.
The deal, announced in January, valued SoFi at $8.65bn, reported CNBC. Ex-Facebook [FB] executive Chamath Palihapitiya has already taken multiple companies public through the increasingly popular SPAC route, including Virgin Galactic [SPCE].
Valuation of SoFi after the deal announced in January
How is SoFi s stock performing?
After SoFi s stock got off to a flying start as Palihapitiya s Social Capital Hedosophia Corp V [IPOE] SPAC began trading under the ticker SOFI on 1 June, the share price peaked the following day at $24.95, a 23.82% jump from its 28 May close at $20.15 its last day of trading as IPOE.
Since then, however, SoFi s stock price has stagnated, closing below the $20.00 level every day since 25 June. On Tuesday 6 July, SoFi closed at $17.35 13.89% below its pre 1 June open.
While it s still very early days, it s also likely that some of the share price gains were already baked in, after the deal to take SoFi public was revealed in early January.
On 7 January, when Palihapitiya s SPAC deal was announced, the IPOE share price jumped 57.26% from $12.12 to $19.14. Taking that into account, SoFi s stock (formerly IPOE) is up 45.34% year-to-date.
Will Reddit attention boost SoFi stock?
The heightened retail trader attention should offer a boost to SoFi s share price over the medium term. Travis Riehl, founder of retail and Reddit investor analytics platform HypeEquity, believes that a significant number of retail investors are planning to hold SoFi stock long-term, believing that it could turn out to be the next Square [SQ] or PayPal [PYPL], reports Natasha Dailey wrote in Markets Insider. In a further boost to SoFi s popularity among the Reddit trading community, Palihapitiya is a favourite among retail investors, Dailey said.
This is a great long-term hold opportunity, because SoFi s digital solution is spreading like wildfire, and SoFi stock is bound to catch fire soon -В Luke Lango
Market Insider equity analyst Luke Lango underscores Reddit investor sentiment with a bullish outlook on both the prospects for the fintech sector as well as SoFi specifically: As interest in financial technology continues to grow, the best players in the space, like SoFi, will begin to really put the heat to banks like Wells Fargo [WFC], Bank of America [BAC] and others. Lango adds: this is a great long-term hold opportunity, because SoFi s digital solution is spreading like wildfire, and SoFi stock is bound to catch fire soon.
What s the analyst view on SoFi stock?
Lango also notes that broker Rosenblatt Securities has recently initiated coverage on SoFi stock with a buy rating and $30 price target, which he says is a huge vote of confidence. Among the two Wall Street analysts covering the stock, SoFi has an average 12-month price target of $27.50, giving the stock a possible upside of 52.10% on last week s close. Both analysts rate SoFi a buy.
We see a unique buying opportunity as a result of this recent selling and ahead of a potentially significant upside catalyst (bank charter approval) – Rosenblatt analyst Sean Horgan
Rosenblatt analyst Sean Horgan said: We see a unique buying opportunity as a result of this recent selling and ahead of a potentially significant upside catalyst (bank charter approval), reports TipRanks. Horgan added: Pressure from early investors taking profits (and short-selling ahead of the lock-up expiration) are likely to weigh on the stock in the near term. However, we expect SoFi’s bank charter approval process to conclude before year-end (adding >25% upside to our EBITDA estimates). Our base-case price target of $30 and downside case of $17 reflects asymmetrical risk/reward to the upside.
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