JPM - SoFi Technologies: Consumer Loan Delinquencies Likely Peaking Upgrade To Hold

2024-05-21 05:54:34 ET

Summary

• SoFi received a sell rating earlier due to potential macroeconomic headwinds and increasing consumer loan delinquencies.
• As initial signs of peaking consumer loan delinquencies are arising, the negative headwinds could abate in the near future.
• The potentially improving macroeconomic outlook could create a tailwind for SOFI.

Introduction

I had a sell rating on SoFi Technologies ( SOFI ) since July 2023 . Since then, the stock price has seen about a 22.8% decline. My reasoning for such a negative view of SoFi resulted from a potential macroeconomic headwind. Consumer loan delinquencies were edging up, signaling a weaker financial health of the overall consumers, with an expectation for this trend to continue. Over multiple quarters following this initial bearish article, I continued to express my pessimism toward SoFi in March 2024 . The main arguments continued to be the increasing consumer loan delinquency rates, which has caused SoFi to expand its lucrative lending business at a slower pace. Additionally, with an expectation for the Federal Reserve to cut the federal funds rate in the coming months, SoFi's net interest income could be threatened as well. As such, over the past few months, I had a negative view of SoFi, largely due to the macroeconomic factors the company is facing....

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