Just like traditional banks that have been around for decades, SoFi Technologies (NASDAQ:SOFI) is a legitimate lender that deserves respect. At the same time, SoFi Technologies is a banking industry disruptor with amazing growth potential. So, even after an impressive year-end bull run, SOFI stock should head higher in the coming months.
I’ve written a cautionary note to prospective SoFi Technologies investors, but I still expect the company to provide excellent value to the shareholders. On that topic, a notable analyst just published a surprisingly high price target for shares of SoFi Technologies. Hence, without further ado, let’s evaluate one Wall Street expert’s bullish argument right now.
Is $14 a Realistic Target for SOFI Stock?
Cutting right to the chase, Truist analyst Andrew Jeffrey reportedly issued a “buy” rating and a $14 price target for SOFI stock. This implies significant upside from the current SoFi Technologies share price.
Interestingly, Jeffrey actually bases his bullish argument on SoFi Technologies’ non-lending businesses. Bear in mind, SoFi is not only a lending bank, but also a one-stop shop for the customers’ personal-finance needs.
Overall, Jeffrey seems to appreciate SoFi Technologies’ move away from its lending business due to higher-for-longer interest-rate policy:
“We argue earnings quality improves as mix shifts to non-Lending. While some may push back on modestly lower EBITDA, we submit SoFi is being prudent given uncertain macro/regulatory. We believe our estimates are conservative and expect greater long-term contribution from non-Lending.”
I see the merit of this argument, though I also envision an easing of higher-for-longer interest-rate policy — but more on that topic in a moment. As for Jeffrey’s $14 price target, SOFI stock more than doubled in 2023, so another 40% or 50% upside in 2024 isn’t out of the question.
Central Bank Policy Changes Will Benefit SoFi Technologies
Even though Jeffrey emphasized SoFi Technologies’ non-lending businesses, there’s no denying that the company generates significant revenue from lending. That’s actually a good thing for SoFi Technologies if higher-for-longer interest-rate policy changes in 2024.
This brings us to the billion-dollar question: How many times will the Federal Reserve cut interest rates in the coming year? SOFI stock jumped in December because the Federal Reserve seemed to hint that there will be at least three interest-rate cuts in 2024. Lower interest rates tend to spur borrowing and lending activity, which would help SoFi Technologies’ lending business.
Furthermore, we can take note of the core personal consumption expenditures (PCE) price index. This is sometimes called the Federal Reserve’s preferred inflation gauge. It increased just 0.1% month over month and only rose 3.2% year over year in November.
In other words, the Federal Reserve’s preferred inflation gauge didn’t come in hot in November. This might encourage the central bank to cut interest rates more than three times in 2024. Again, this would be a boon for U.S. lenders in general and SoFi Technologies in particular.
Two Possible Strategies for SOFI Stock
I’m still somewhat cautious because the SoFi Technologies share price more than doubled in 2023 and jumped in December. Yet, I understand if some people just want to buy SoFi shares now. This could make sense for investors who plan to hold the stock for five years or longer.
However, some traders might want to get in at a more favorable share price. In that case, I like the idea of waiting until SOFI stock declines 10% or even 20%. Then, you can start accumulating shares with a price target of $14 for the next 12 months.
On the date of publication, David Moadel did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
