What happened
Shares of digital bank and one-stop shop financial services company SoFi Technologies (SOFI -0.43%) traded roughly 3.3% higher today as of 2:53 p.m. ET after receiving an upgrade from Wall Street.
So what
Bank of America analyst Mihir Bhatia upgraded SoFi from a neutral rating to a buy rating and raised the stock's price target from $8 per share to $9. The stock currently trades at just over $6 per share.
Bhatia sees an attractive risk-reward proposition right now and expects SoFi to benefit from the expiration of the student loan moratorium at the end of the year.
Payments on federal student loans have paused for more than two years now, which has significantly slowed student loan refinancing activity, formerly SoFi's largest lending product. Since this pause, SoFi's student loan business has largely been operating at half capacity or less.
President Joe Biden has also granted forgiveness on a portion of federal student loan debt, a plan that would largely forgive $10,000 for those who earn up to $125,000 per year. This could also boost student loan refinancing activity at SoFi because it gives federal borrowers clarity on forgiveness, which could enable them to move forward with refinancing if they have been contemplating it.
Now what
SoFi is still suffering from high levels of stock-based competition and its financial services division is still losing a lot of money, but I largely agree with Bhatia's buy recommendation here.
The other nice thing about the bank is that it caters to a very affluent customer base with high FICO scores and strong annual incomes, which should make the company more resilient in any kind of recession.
