The first half of 2023 was a challenging time for the banking sector. However, SoFi Technologies (NASDAQ:SOFI) survived the upheaval and is now gaining favor among investors. There are no guarantees, but SOFI stock could be in the beginning stages of a longer-term rally and should appeal to risk-tolerant financial traders.
It’s true, as we’ll see, that one prominent big-bank analyst firm isn’t very optimistic about SoFi Technologies. But then, SoFi and the big banks never really had the same vision and objectives.
Indeed, SoFi Technologies is on a mission to disrupt and replace the traditional banking system as we know it. Thus, SOFI stock may be appropriate for investors who will take a chance on a truly unique fintech firm.
Looking Beyond the SOFI Stock Downgrade
As we’ve previously reported, Morgan Stanley analyst Jeffrey Adelson downgraded SoFi shares to an “underweight” rating.
This is like a “sell” rating and is based on the claim that SoFi Technologies “increasingly like a bank,” and therefore “needs to be valued more like a bank.”
Adelson is in the minority, as most analysts don’t rate SOFI stock as a “sell” or equivalent. More typical is Stephens analyst Vincent Caintic, who initiated his coverage of the stock with an “equal weight” rating (which is like a “hold” rating).
What Adelson and some other analysts don’t seem to recognize is that SoFi Technologies shouldn’t be compared to traditional banks. Just because SoFi has a banking charter, doesn’t mean it’s run similarly to older banks.
Take a glance at SoFi Technologies’ website and you’ll see that the company appeals to a younger demographic. There’s a consistent emphasis on helping young students manage their debt burden.
Plus, SoFi represents the next generation of personal finance as it’s truly a one-stop shop for novice bankers.
Cooling Inflation Is a Boon for SoFi Technologies
Investors who agree with Adelson’s assessment might want to stick to big-bank stocks. That’s a lower-volatility approach, and SOFI stock is a fast mover so it’s not appropriate for all portfolios.
SoFi Technologies has an external tailwind as easing inflation. As you may be aware, annual Consumer Price Index growth fell to 3% in June.
Annual core Personal Consumption Expenditures growth declined to 4.1% in June; this is the slowest core PCE growth rate since September 2021.
Inflation is cooling down, and that’s great news for SoFi Technologies and its stakeholders. The market knows this, and it pushed SOFI stock up 5% on July 28, right after the announcement of the PCE growth rate.
Lower inflation means that consumers have more spending power. They’re in a better position to take out mortgage loans (which SoFi can help them with), or to travel or start investing (SoFi can help with those activities, as well).
SOFI Stock Could Be a Bet on Lower Inflation
There’s no way to predict the future course of inflation. However, if you expect inflation to remain under control, consider this. SoFi Technologies should thrive during the coming quarters if consumers aren’t encumbered by high inflation.
Investors shouldn’t try to compare SoFi Technologies to traditional banks. Instead, value the company on its own merits; SoFi’s uniqueness is its strength.
SOFI stock earns a “B” grade because it’s not right for every investor. Only consider a share position if you’re on board with SoFi’s unusual and disruptive vision. Just maybe, SoFi Technologies will provide surprisingly powerful returns to its stakeholders in 2023’s second half.
On the date of publication, neither Louis Navellier nor the InvestorPlace Research Staff member primarily responsible for this article held (either directly or indirectly) any positions in the securities mentioned in this article.
