WallStreetBets and Wall Street Love SOFI Stock: Should You, Too?

Reddit group WallStreetBets has a thing for Chamath Palihapitiya companies. SoFi (SOFI) and Clover Health (CLOV), both of which merged with SPACs sponsored by Palihapitiya, are currently the top trending names in the group. Should buy SOFI stock?

SOFI and CLOV surged to all-time highs amid WallStreetBets short squeezes. Even Virgin Galactic (SPCE), which was the first company to go public with a Palihapitiya SPAC, has been a popular name on WallStreetBets. However, Palihapitiya sold all of his personal stake in SPCE stock.

The forecast for SOFI stock looks bullish among Wall Street analysts. Of the six analysts covering the stock, five have a “buy” or equivalent rating while one has a "hold" rating. Their average target price for SOFI is $24.58, which implies a 33 percent upside.

On Oct. 11, Morgan Stanley initiated coverage on SOFI with an “overweight” rating and $25 target price. The stock soared after Morgan Stanley Betsy Graseck wrote that she's bullish on the stock for several reasons. She believes SoFi’s student loan refinancing business should bounce back in 2022 as the moratorium ends. While the Biden administration has made it easier for public sector employees to cancel student loans, for all other borrowers, loan payments look set to restart in Feb. 2022.

The student loan refinancing business has been dead since March 2020, when a moratorium was placed on them. Now, as loan repayments start up again, companies like SoFi will see a spike in business.

Morgan Stanley listed a possible bank charter as another bullish driver for SOFI stock. SoFi is among the frontrunners to get a bank charter, and the decision could come as soon as the end of 2021. A bank charter could be a game-changer for SoFi and propel its earnings by giving it access to low-cost funds.

Morgan Stanley is also bullish on SoFi’s digital product offering. “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,” Graseck said in her note.

In typical Reddit fashion, WallStreetBets members are talking of taking SOFI to the moon. While some members are upset that they entered the stock at a higher price, others seem bullish on it.

A user by the name iceburg_crumble said that while they don’t believe SOFI is a million-maker stock, a two- or threefold upside looks likely. Another user, UsedTask, said that SOFI is a buy considering the upcoming catalysts.

The fintech story looks bullish and SOFI is a diversified play on the fintech space. The stock is among the fintech names that look like good long-term investments. There are short-term catalysts as well, especially the bank charter, which is not yet factored into the stock's price. SOFI looks a good buy at these prices, irrespective of its popularity on WallStreetBets.