Without a doubt, SoFi Technologies (NASDAQ:SOFI) stock is a lightning rod on Wall Street. You can love or hate the company, but you can’t just ignore SoFi Technologies.
If you’re thinking about dumping your SOFI stock now, though, consider why the share price is down. After considering the facts and the big picture, you might choose to add to your share position.
Suffice it to say, there’s no consensus opinion about SoFi Technologies.
For example, Truist Financial Securities analyst Andrew Jeffrey envisions SoFi Technologies stock rallying to $14. On the other hand, Mad Money host Jim Cramer is clearly getting frustrated with SoFi Technologies.
No matter which side of the fence you’re on, just be ready for volatility and a big share-price move (or two, or three). The buyers will probably prevail in the long term, but it won’t be an easy path to victory.
Why Is SOFI Stock Down?
SOFI stock is down substantially this year so far, which is frustrating when many other stocks are in the green.
During a “Lightning Round” segment on Mad Money, Cramer succinctly explained what’s going on:
“They were doing great, and then they did this convertible bond, and it just wrecked the stock,” he said. “The stock has just been in the doghouse ever since, and I don’t like it when I tell people to buy a stock and it’s staying in the doghouse. We got to find out what the heck is going on there.”
Presumably, Cramer’s referring to SoFi Technologies’ announcement that the company plans to issue and sell $750 million worth of convertible senior notes. SoFi Technologies stock did, indeed, drop sharply after this disclosure.
Is this such a terrible thing for SoFi Technologies to do? Bear in mind, it’s not share-value dilutive since SoFi isn’t printing up new common-stock shares. Plus, the senior note sale will provide the company with a huge capital injection.
Of course, SoFi Technologies will have to pay back the bondholders in full with interest. It’s hard to imagine that this will be too difficult, though. After all, in just the fourth quarter of 2023, SoFi Technologies generated GAAP net revenue of $615.4 million.
The Market Will Forgive SoFi Sooner or Later
So, the market put SoFi Technologies in the penalty box for raising debt. Yet, eventually investors should calm down and see the glass as half full.
Cramer actually sat down and spoke with SoFi Technologies CEO Anthony Noto about the debt issuance. “We did this deal from a position of strength,” Noto assured.
I tend to concur with Noto’s statement. SoFi Technologies did, indeed, demonstrate financial strength in 2023’s fourth quarter, when the company posted its first GAAP-measured profit.
Noto added, “What we saw was an opportunity, from that position of strength, to lower our cost of debt.” SoFi Technologies basically refinanced its debt. That’s ironic, since the company has helped many of its customers refinance their debts.
SoFi Technologies just needs to stay on the right, profitable path in the coming quarters. With that, the company should be able to assuage the market’s fears, uncertainties and doubts.
SOFI Stock: $5 or $10, Here We Come!
It’s hard to predict whether the SoFi Technologies share price will hit $5 or $10 first. Either way, expect a big breakout or breakdown. The market will continue to beat the stock down or, hopefully, forgive SoFi Technologies and start buying the shares.
SoFi Technologies didn’t really do anything terrible, so forgiveness shouldn’t be too difficult. And, once the market stops hating a company and starts loving it again, the share-price move can be epic.
So, keep your position size small but prepare for SOFI stock to break above $10 and then move on to higher price targets.
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.
