Should you bet on SoFi Technologies as Morgan Staley heaps praise on revenue growth?

By: Motiur Rahman
Motiur Rahman
Md Motiur enjoys researching how companies are solving challenges the world will face over the coming decades. In his… read more.
on Oct 11, 2021
  • SoFi Technologies shares on Monday spiked 12% after a positive update from Morgan Stanley.
  • The firm issued a note to investors calling the stock a revenue growth story.
  • It initiated SOFI coverage with an overweight rating and a price target of $25.00 per share.

On Monday, SoFi Technologies Inc. (NASDAQ:SOFI) shares surged 12% to trade above $18.00 per share after Morgan Stanley analysts initiated coverage with an overweight rating. The analysts cited the company’s exciting revenue growth story, setting their price target at $25.00 per share.

Analyst Betsy Graseck said the company has a powerful revenue growth story as it ramps up a share of the financial services wallet.

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In a note to investors, the analyst wrote:

“Competition is rising among challenger FinTechs for Gen Y & Z, but SOFI has a leg up given its roots in the hardest part of consumer finance, lending, along with a robust digital offering,”

The stock is now up 48% this year and more than 73% over the last 12 months. SoFi Technologies recently announced a convertible debt offering stretching its convertible notes to $1.1 billion.

Should you bet on SOFI’s growth?

Although SoFi Technologies shares trade at a steep price-sales ratio of about 16.31, this valuation multiple could improve significantly in the coming quarters based on Morgan Stanley’s hyped revenue growth story. 

Moreover, at the current price of $18.13, the stock still trades below the consensus Street price target of about $23.83. Therefore, the stock has an upside potential of about 31%, making it an exciting buy for investors willing to bet on its growth story.

Source – TradingView

Is a pullback close?

Technically, SoFi Technologies shares appear to be trading within a sideways channel formation in the intraday chart. The stock has recently bounced back to rally above the 100-day moving average. 

As a result, the stock has now moved closer to the overbought conditions of the 14-day RSI. Therefore, a pullback could be on the horizon.

Investors could target short-term pullbacks at about $16.65, or lower at $14.85, while $19.48 and $20.85 are crucial resistance zones.

Is it too late to buy?

In summary, although SOFI shares are up 48% this year, the stock is still down nearly 24% from its June high, and close to 30% off its year-to-date highs. 

Therefore, given its exciting revenue growth and the share price compared to the consensus Street price target, it may not be too late to buy the stock.

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