By SoFi Technologies (ticker: SOFI), the fintech company, received a boost in its rating from Morgan Stanley analysts following a strong third-quarter earnings report. In their Tuesday report, the analysts upgraded SoFi to Equal Weight from Underweight.
The stock experienced a significant 8% increase to $7.50 on Tuesday afternoon, marking its largest percent increase since July 31 when it gained 20%, as reported by Dow Jones Market Data. Throughout this year, SoFi shares have soared by an impressive 63%.
This upgrade represents a reversal of opinion for the analyst team, as they had previously downgraded the stock to Underweight back in July. One of the reasons cited for the downgrade was the anticipation of disappointing revenue growth in 2024, along with a smaller-than-expected opportunity in student loan refinancing.
However, with the stock now trading closer to their price target of $7, the Morgan Stanley team sees a more balanced risk-reward skew. They stated that they are incrementally more positive on the near-term outlook into 2024 based on the results of the third quarter.
The analysts also highlighted several positive factors in their report. Firstly, they pointed out a better-than-expected income growth forecast for the next quarter. Additionally, strong student loan origination numbers in the third quarter were noted, along with expectations for nonlending segments to reaccelerate into 2024 as lending revenues slow down.
In the third quarter, SoFi posted an adjusted loss of 3 cents per share, surpassing Wall Street’s expectations of a loss of 8 cents, according to FactSet. Chief Executive Officer Anthony Noto emphasized the nonlending businesses as the primary driver of growth into the fourth quarter and the following year. He believes that lending will be additive to growth rather than the main driver.
Overall, this rating upgrade from Morgan Stanley reflects the positive sentiments surrounding SoFi Technologies following its strong third-quarter performance.
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