What happened
Although it has been somewhat of a turbulent week due to inflation data and the Federal Reserve's interest rate decision, the stock market is significantly higher than where it was at the end of last week. All three major benchmark indices were significantly higher nearly four full days into the trading week. However, two stocks with especially strong momentum have been fintech disruptor SoFi Technologies (SOFI +2.05%) and real estate iBuyer Opendoor Technologies (OPEN +1.11%).
Even after a bit of a pullback, SoFi was higher by 15% from Friday's close as of Thursday midafternoon. Opendoor was performing even better, with a 24% gain this week, according to data provided by S&P Global Market Intelligence. Both have significantly outperformed the S&P 500, which was up by roughly 3% on the week, and have been standout performers in the recent market rally.
NASDAQ: SOFI
Key Data Points
So what
There isn't much in the way of company-specific news driving these two stocks higher. But they both have certainly had quite a bit of momentum over the past few weeks due to some potential catalysts that could result in significant upside potential.
In SoFi's case, the main reason for renewed investor optimism seems to be the debt ceiling deal, which (among other things), mandates that the student loan payment pause will end after Aug. 30. Federal student loan borrowers haven't had to make any payments on their loans, and interest hasn't accrued since the start of the COVID-19 pandemic more than three years ago.
NASDAQ: OPEN
Key Data Points
Student loan refinancing is a cornerstone of SoFi's business, and with nearly $1.8 trillion in outstanding student loans in the United States, even a small percentage of borrowers choosing to refinance could be a big win for SoFi and its investors.
It's also worth noting that several prominent analysts have upgraded and/or raised price targets on SoFi, which is likely helping the stock's rally as well.
In Opendoor's case, we're finally seeing signs of stability in the real estate market. After peaking in mid-2022 (when Opendoor was buying massive quantities of homes), home values reversed course and fell by nearly 2% through February 2023. This resulted in Opendoor having to unload lots of inventory at a loss.
However, most of the "legacy" inventory is now off the books, and home prices are rising again. With the Fed's latest move signaling interest rate hikes are coming to an end, it's a good sign that iBuying might become profitable once again.
Now what
To be sure, we don't know what kind of impact student loan refinancing could have on SoFi's business in the coming quarters, and iBuying is far from being a proven, sustainable business model even in a stable real estate market. So while the conditions have certainly become more favorable for these two businesses, we don't yet know how it will translate into top-line growth or bottom-line profitability.
