Needham analysts initiated research coverage of SoFi Technologies (NASDAQ:SOFI) with a Buy rating and a target price of $10.
SOFI stock closed 4.7% higher on Wednesday.
“We view SOFI as a long-term winner in the digital lending/neobank space, largely due to its focus on prime and super-prime consumers and possession of a full banking license, which we believe provides the company superior unit economics compared to other consumer finance platforms that focus on lower-income borrowers and/or lack a banking license,” analysts said.
The brokerage’s 12-month price objective on SoFi stock implies over 30% upside from the latest closing price.
Needham analysts believe that the company’s consumer lending business, which constitutes approximately 80% of its total revenue, has reached a significant scale.
In addition to its core business, SoFi has recently improved its financial services portfolio by securing a full banking license after acquiring Golden Pacific in 2022, analysts added.
“We expect this to provide efficient and sticky funding that reduces revenue/EPS volatility, a common pitfall for digital lenders with more fickle sources of funding,” said analysts.
SoFI stock is down nearly 22% this year, notably underperforming the broader market.