The Ratings Game: SoFi is the ‘fastest growth story in consumer finance,’ analyst says as stock pops

SoFi has taken a unique approach to winning over millennial and Gen-Z customers, according to Graseck. While some rivals have begun with payment products and then tried to sell their customers on lending offerings after securing a relationship, SoFi has been building out its lending suite for more than a decade.

Lending is “arguably the most difficult and expensive consumer finance offering,” Graseck wrote, so SoFi has advantages stemming from underwriting expertise, brand reputation, and customer service.

Graseck expects that SoFi will see student-loan volumes “sharply ramp” in the near term as the government’s deferment program expires. Student lending “for now remains SoFi’s largest revenue driver,” but the federal moratorium has weighed on its stock, she argued.

“We believe the potential for positive guidance revisions on the back of this fast-approaching forbearance end date in ~4 months provides an opportunity for investors to enter the stock now before it breaks out of the range of the past six months,” Graseck continued.

Sofi shares have added 4% over the past six months as the S&P 500
SPX,
-0.69%
has risen 6.4%.

She is also upbeat about SoFi’s pending bank charter. The company announced in March that it planned to acquire a small community bank, which was expected to speed up its process of getting approved for a bank charter, and Graseck sees opportunities for the company once its formally gets its charter.

“This alone could boost total revenues by ~10% in its first full year given benefits to [net interest margin,” Graseck wrote, though she has only incorporated the approval into her bull-case model. Approval “would be incremental to both our base case as well as consensus,” she continued.