A veteran trader is revising his stock price target for SoFi Technologies

SoFi, that good?

Stephen Guilfoyle of TheStreet Pro thinks so.

The veteran trader, whose career stretches back to the 1980s at the New York Stock Exchange, listened to what SoFi Technologies CEO Anthony Noto had to say during a recent CNBC interview and came away impressed.

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“What struck me was that Noto said his firm had 50% inflows in Q2 and that so far Q3 has been strong in the department as well,” Guilfoyle wrote in his Sept. 4 column. “Noto said SoFi saw very strong debit spending in Q3, but that it didn’t come at the expense of deposit growth.”

The fintech company’s customers spend on income and not because of a wealth effect, he said. He added that the CEO “doesn’t see the kinds of delinquency problems that another institution might see.”

“Furthermore, while credit cards and personal loans are performing as expected, the firm is seeing very strong investment inflows,” Guilfoyle told readers. “Basically, Noto acknowledged that SoFi is seeing improved deposits, improved net flows and improved spending.”

SoFi (SOPHIE) beat Wall Street expectations for second-quarter earnings in July, and Noto told analysts that “our rapid diversification made a record quarter of revenue possible, even with just a 5% increase in adjusted net lending income.” .

SoFi Technologies CEO Anthony Noto

Brian Ach/Getty Images for TechCrunch

Trader says ruling ‘plays well for creditors’

“Combined revenue from financial services and technology platforms grew 46% year-over-year and now represents 45% of total adjusted net income, up from 38% a year ago,” said Noto, a former US Army Ranger, while company. winning call.

“We are really encouraged by our team’s ability to bend the curve through tight underwriting, limiting prudent credit exposure and improving collections and service,” he added.

Related: Veteran Wall Street trader reacts to SoFi’s second-quarter earnings

Guilfoyle also noted that SoFi will benefit from the U.S. Supreme Court’s recent decision not to reinstate the Biden administration’s Saving on a Valuable Education student loan repayment plan, which aims to lower monthly payments for millions of borrowers.

The plan was blocked by a federal appeals court earlier this summer due to a legal challenge led by several Republican states.

The program was introduced last year after the Supreme Court struck down Biden’s larger student loan debt relief plan, which would have forgiven up to $20,000 in student loan debt for up to 43 million Americans.

The new plan was set to lower monthly payments for many borrowers and allow those with balances of $12,000 or less to pay off their debt after 10 years.

“By taking the weight out of taxpayers and putting it back on borrowers, a ruling like this is obviously good for lenders like SoFi Technologies,” said Guilfoyle, who raised his price target on the company’s stock to $10.25 from $9.50.

Noto said student loans rose 86 percent year-over-year in the quarter.

“The team drove our strongest origination volume in Q2 in three years, repeating to drive continued improvement throughout the quarter and in Q3 with private debt financing, exemplifying our ability to respond to environmental factors for to generate results,” he said.

SoFi CEO: Student loan refinancing is strong

Noto said student loan refinancing, “a product that shouldn’t do very well in this interest rate environment … had strong growth.”

“Student loan refinancing is our oldest and largest product, and we think it’s starting to enter a period where it can do quite well,” he told analysts.

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Last year, SoFi sued the Biden administration for halting federal student loan payments, saying the moratorium had no legal basis and cost the bank millions of dollars in profits.

Student loan payments were first halted at the start of the pandemic by President Donald Trump’s administration. The break was extended eight times in three years.

SoFi said its federal student loan refinancing business has suffered because borrowers have little incentive to refinance while payments and interest remain pending, the Associated Press reported.

Sen. Elizabeth Warren (D-Massachusetts) and Rep. Ayanna Pressley (D-Massachusetts) sent a letter to Noto in April 2023, charging that “SoFi’s attempt to end the student loan payment hiatus and force millions of Americans to repay while they host. massive earnings and doling out huge executive pay is corporate greed at its worst.”

SoFi dropped the suit a short time later.

More recently, seven Republican-led states filed a lawsuit on Sept. 3 to challenge the Biden administration’s latest student debt forgiveness plan, saying the U.S. Department of Education is taking steps to begin canceling the loans, Reuters reported.

Attorneys general in states including Georgia and Missouri said they recently obtained documents showing the Education Department instructed federal loan servicers to begin writing off hundreds of billions of dollars in loans as early as Sept. 3 or Sept. 7 before the completion of the rules.

An Education Department spokesman declined to comment on the case to Reuters, but stressed that it “will continue to fight for borrowers across the country who are struggling to repay their federal student loans.”

At the end of the earnings call, Noto said Q2 was “the most rewarding quarter and dare I say the most fun I’ve had at SoFi in quite some time.”

“What made it special in fun was that we challenged ourselves to be better in the areas that are the most difficult in today’s environment that shouldn’t do well in this environment, like home loans and student loan refinancing,” he said. .

“Hard is not for everyone,” Noto concluded. “But for me and the people staying at SoFi, it’s a great fit.”

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