What happened
SoFi Technologies (SOFI 0.26%) was up on Tuesday, jumping about 4.3% as of market close. It is trading at about $5.68 per share.
The major indexes were mixed on Tuesday, as the S&P 500 was down 8 points (0.2%), the Dow Jones Industrial Average was off 392 points (1.1%), while the Nasdaq Composite was down 16 points (0.14%).
So what
It is fourth-quarter earnings season, and the market took a bit of a hit today as some of the big bellwether banks reported Tuesday, including Goldman Sachs and Morgan Stanley. Goldman Sachs had its worst earnings miss in a decade, as it got hit hard by the slowdown in the investment banking business. But Morgan Stanley beat estimates, even though its investment banking arm struggled. However, it was buoyed by strength in its wealth management and trading businesses.
As a bank and lender, SoFi dropped early on the Goldman Sachs news, but it bounced back as the day went on, potentially on a rating from JPMorgan Chase analyst Reginald Smith on Tuesday.
Smith initiated coverage on SoFi Technologies with $6 price target and a neutral rating. The $6 target is up about 5.6% from the closing price on Tuesday.
While Smith thinks SoFi will be a long-term winner, he said the "once-in-a-generation Fed tightening cycle" could result in loan write-downs that hurt the stock in the near term, reported The Fly.
Now what
While investment banking struggled in the fourth quarter, some of the large consumer banks that reported last week fared much better. Bank of America, for example, beat revenue and earnings expectations on higher net interest income and solid loan activity. This might bode well for SoFi, as a digital lender, when it reports fourth-quarter and year-end earnings on Jan. 30.
The Jan. 30 earnings report should also provide some insight and guidance on the outlook for 2023. The strength of economy, inflation, interest rates, and consumer spending will all be worth watching for SoFi investors as reports on these metrics come out over the next few weeks.
