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SoFi Technologies Inc. shares have more than doubled this year, but they’re still cheap in the eyes of BTIG analyst Lance Jessurun.
“Ultimately, while SoFi’s shares may be inexpensive now, it’s difficult to see valuation remaining this low,” he wrote in a Tuesday note to clients, as he initiated coverage of the financial-technology name with a buy rating and $14 target price.
Don’t miss: SoFi’s stock is still ‘controversial,’ but this analyst sees a sign of progress
Jessurun thinks SoFi shares
SOFI,
will benefit as the company marches toward its target of GAAP profitability by the end of 2023, and he sees “potential further upside coming from the end to the student-loan payment moratorium.” The stock is his top pick in the consumer-fintech sector.
More from MarketWatch: SoFi’s stock surge continues as debt-ceiling deal brings ‘highly positive development’
SoFi executives continue “to execute at a very high level,” in his view, and they’re invested in the company through more than just their work as leaders. Jessurun cited “frequent insider purchases, signaling to us that [management] is engaged and in the story for the long run.”
See also: SoFi CEO Noto remains an aggressive buyer of stock with new $500,000 purchase
He applies a roughly four-times tangible-book-value multiple to get his $14 target price, which implies nearly 50% upside from recent levels; SoFi shares closed Tuesday at $9.54.
“Our multiple is a slight premium to peers, but we believe this is warranted given strong deposit growth despite the broader industry seeing outflows, and the benefits of the tech platform, which we believe are typically overlooked in SoFi’s usual Street valuation,” he wrote.
Read: SoFi’s stock draws extreme reactions. What one analyst thinks will follow the latest surge.
Jessurun is excited about multiple elements of SoFi’s business story, including its “flywheel,” or the idea that once SoFi gets consumers hooked on one financial product, it will be able to sell them on more. This was “viewed as little more than a marketing buzzword” when SoFi came public through a merger with a special-purpose acquisition company about two years back, but now the narrative is playing out as intended.
“Prior to 2020, SoFi was primarily a lending-first platform, but members are adding financial services products at breakneck speed, now averaging 5 financial services products to 1 lending product, up from a 1:1 ratio prior to 2021,” he wrote. “This is concrete evidence of SoFi’s productivity loop working effectively, and we expect financial services to drive continued strong top-line growth in years to come.”
Jessurun further notes that fintech rivals have “scrapped near-term profitability plans and loosened credit standards, but SoFi continues to execute effectively, and a resolution to the student loan payment overhang should be a catalyst to drive share prices from here.”
Also on MarketWatch: SoFi CEO says a person pulling down $100,000 or more ‘really struggles to live the American Dream’
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