SoFi stock price: buy the dip or sell the rip?

on Jul 6, 2022
  • SoFi stock price has crashed by 80% from its all-time high.
  • The shares have tumbled because of the student debt moratorium.
  • The stock will likely recover in the long term.

The SoFi (NASDAQ: SOFI) stock price has dropped to important support as some investors consider buying the dip. The shares are trading at $5.84, which is about 80% below the all-time high. As a result, the fallen angel market cap has crashed from about $20 billion to $5.5 billion.

The fall from grace

SoFi is a fintech company that provides a diverse number of services to more than 3.8 million customers. The company is well-known for its student loan services that account to a substantial part of revenue.

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SoFi has also expanded its solutions to include products like cryptocurrency and stocks trading, mortgages, credit cards, insurance, and auto refinancing among others. 

The SoFi stock price has been in a strong downward trend as investors react to the decision by the government to delay the repayment of student loans. As a result, the company decided to lower its net revenue guidance from $1.57 billion to $1.47 billion. It also reduced its EBITDA guidance from $180 million to $100 million. 

SoFi shares have also dropped because of the rising risk of a recession in the US. Historically, recessions tend to lead to lower consumer spending. 

Further, the company’s stock has dropped because of the significant decline of stock and crypto trading activity. This explains why companies like Coinbase and Robinhood have crashed.

Still, there are two catalysts that could propel the SoFi share price upwards. First, the stock is severely undervalued. This valuation ignores the company’s strong revenue growth and the fact that the moratorium of student loans will end possibly after the mid-term elections.

Second, the company recently acquired a bank charter, which will lower its cost of financing. As a bank, the firm can even benefit as interest rates rise. Finally, the stock market is simply going through a cycle that will end soon.

SoFi stock price forecast

Sofi stock price

The daily chart shows that the SoFi share price has been in a strong bearish trend in the past few months. The shares found a strong support at $5, where it has formed a small double-bottom pattern. It remains below the 25-day and 50-day moving averages.

Therefore, the outlook of the stock is still bearish for now. This will see it drop below $5 soon. In the long-term, the shares will recover and retest the resistance point at $7.50.

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