SoFi stock (NASDAQ: SoFi) is making headlines as the student loan repayments are set to continue. Due to a prolonged pause in student loan repayments, SoFi Technologies has added more products to its offering as the demand for student loan refinancing fell significantly in the last few years.
The benchmark indices slipped on Thursday as investors remained cautious ahead of the release of the Non-Farm Payrolls data. Both the Nasdaq 100 index and the S&P 500 index have been facing strong bearish pressure since their September highs. However, SoFi stock outperformed most of the stocks as gained 2.28%.
SoFi Stock News
After a 3-year pause in student loan repayments, the Biden administration has announced a resumption of the repayments. This may act as a strong tailwind for the shares of SoFi Technologies, whose primary focus is student loan refinancing. President Biden also announced a student debt relief of $9 billion for three different types of classes.
According to reports, around 44 million have student loans worth $1.6 trillion. The resumption of these loan payments will have a huge impact on the whole economy of the country. This also means an increase in the demand for loan refinancing services, where companies like SoFi come into play.
SoFi Technologies Holds 80% Personal Loans
As mentioned earlier, a slump in the student loan refinancing market forced SoFi to offer personal loans. The online bank has been offering these products since 2022, and they now account for 80% of its loans.
While SoFi remains confident that these loans are high-quality, we never know how things might play out in case of a recession. The quantitative tightening is expected to prolong till the middle of next year. Analysts fear that a prolonged era of high interest rates may result in mass lay-offs and sluggish growth.
These conditions may increase the default rate on personal loan products offered by SoFi, which may also impact the SoFi stock price. However, the US Federal Reserve remains confident on a soft landing and doesn’t see the economy contracting in the coming months.
SoFi Stock Forecast Today
The shares of SoFi Technologies are changing hands 35% below its yearly peak of $11.7. The stock has been constantly making lower highs and lower lows since July 2023, which signifies an intense downtrend. Nevertheless, the stock remains 69% above the yearly lows, which shows that the bulls are still pretty much in the game.
The strength shown by a personal finance company like SoFi this year is extraordinary. The rising bond yields are acting as strong headwinds for the banking sector. This also resulted in the collapse of multiple regional banks in Q1 2023.
However, SoFi stock price remained resilient as the stock rebounded strongly from its May lows. If the price gains strength above the key psychological level of $10 in the coming days, there could be more gains waiting for the holders.
SoFi Stock Price Technical Analysis
Technical analysis often reveals critical areas of demand and supply on equity charts. Considering the following NASDAQ: SOFI chart, we can identify a range in which the price has been trading since May 2022. Earlier this year, the stock broke out of this range, but the bulls failed to gain strength above the range highs of $8.2. This has flipped the SoFi stock price forecast bearish for me.
After a rejection from the range high, stocks usually move toward the middle of the trading range, which currently lies at $6.50. However, the bullish divergences are developing on the Relative Strength Index (RSI) and the Money Flow Index (MFI). These indicate a short-term bounce on the lower timeframes.
Is SoFi Stock A Good Investment?
The student loan refinancing is a massive market in the United States. The demand for this SoFi product is unlikely to decrease anytime soon. However, as we have learned from the 2008 financial crisis, a default on the loans has a cascading effect on the whole ecosystem.
Therefore, if Jerome Powell fails to deliver a soft landing, equity valuations may tank to new lows in 2024. You must keep this risk in mind before buying any bank stock right now.
NASDAQ: SOFI Longterm Outlook
An analysis of the monthly chart of NASDAQ: SOFI shows that the asset has broken the bullish market structure on the weekly timeframe. This occurred when the stock made a lower low on the weekly chart. This puts a retest of the $4.86 level on the cards, where lie the lows of the current trading range.
This means a potential 36.7% downside for the SoFi stock price. The invalidation of this bearish price target will be a weekly closure above the September high of $9.19. The overall health of the US economy and the bond yield will keep the stock prices of the financial institutions in check for the coming months.
You are also welcome to follow me on Twitter to keep track of my personal trades and my updated outlook on SoFi.
