SoFi's stock surge continues as debt-ceiling deal brings 'highly positive development'
By Emily Bary
Impending end to moratorium 'clears the path for SoFi to begin leveraging its historical leadership position in the student-lending market,' analyst says
Shares of SoFi Technologies Inc. were extending their sharp rally Wednesday amid Wall Street optimism about the company's ability to benefit from the impending end of the student-loan payment moratorium.
The company's shares (SOFI) were up 15.0% in Wednesday's session and on track to log their largest single-day percentage gain since Aug. 3, 2022, when they advanced 28.4%. Wednesday's action followed an 11.5% rise in Tuesday trading.
The two-day surge comes as the debt-ceiling agreement reached by President Joe Biden and House Republicans contained a provision that would spell the official end of the federal government's pandemic-era pause on student-loan payments. Lawmakers still need to vote on the deal.
While the debt-ceiling deal doesn't change the timeline around the moratorium, which was already expected to end after August, it brings a level of certainty around a policy that has been extended numerous times in recent years and that has dented SoFi's student-loan refinancing business along the way.
'Enough -- it's hurting our business': SoFi's campaign to stop the student-loan payment pause that helps its own customers
SVB MoffettNathanson analyst Eugene Simuni wrote Wednesday that the deal wouldn't change his base-case outlook for the company, which assumes SoFi sees a burst of perhaps $1.2 billion new student-loan originations in the fourth quarter and "a full recovery of student loan originations to the pre-pandemic levels" next year.
Read: Why this SoFi bull says skeptics are misunderstanding the stock
"Nevertheless, the passage of the measure would be a highly positive development for SoFi," he wrote. "It derisks the company's near-term financial outlook (the 4Q rebound is student lending is needed for SoFi to meet its 2024 financial goals) and it clears the path for SoFi to begin leveraging its historical leadership position in the student-lending market to boost its newer franchises (e.g., using student lending as a customer acquisition channel for the personal and home lending businesses)."
SoFi's strategy is to entice customers with one financial product and then to use that relationship to get more involved in other areas of its members' financial lives.
See more: SoFi CEO says a person pulling down $100,000 or more 'really struggles to live the American Dream'
In Simuni's view, passage of the bill would enhance SoFi's potential "to build a durable digital banking business." The company obtained its banking charter in January 2022.
-Emily Bary
This content was created by MarketWatch, which is operated by Dow Jones & Co. MarketWatch is published independently from Dow Jones Newswires and The Wall Street Journal.
(END) Dow Jones Newswires
05-31-23 1508ET
Copyright (c) 2023 Dow Jones & Company, Inc.