There’s a “good news, bad news” situation happening now with SoFi Technologies (NASDAQ:SOFI). The good news is that SoFi just acquired a mortgage lender and this will diversify the company’s business model. On the other hand, the Supreme Court’s recent student loan ruling could be problematic for SoFi Technologies. All in all, it makes sense to allow SOFI stock to pull back before jumping into the trade.
It’s a tough time to operate a financial firm because some customers are worried about banking-crisis contagion. The failures of SVB Financial Group (OTCMKTS:SIVBQ) subsidiary Silicon Valley Bank and Signature Bank (OTCMKTS:SBNY) have prompted U.S. banks to reassure their clients that they are viable and responsible.
Fortunately, SoFi Technologies is separating itself from the likes of Silicon Valley Bank and Signature Bank. As we’ll see, SoFi isn’t entirely problem-free. Still, a share position in SoFi Technologies should yield excellent results if you buy at the right price.
Set Your Limit Order for $5 With SOFI Stock
SOFI stock has, more or less, bounced off of the $5 mark multiple times over the past 12 months. This is a signal that there are big-money buyers ready to step in whenever the stock gets down to $5.
Why not just buy now? Mainly, it’s because of a very recent Supreme Court ruling. According to MarketWatch, the Supreme Court “allowed at least $6 billion in student-debt relief for roughly 290,000 borrowers to move forward.”
This could put negative price pressure on SOFI stock. Bear in mind, some of SoFi Technologies’ revenue comes from the interest paid when customers refinance their student loans.
It’s going to be more difficult for SoFi Technologies to make money from federal student loans if they’re forgiven by the government. It’s a smart move, therefore, for investors to let the market punish SoFi a little bit before taking a share position.
SoFi Technologies’ Mortgage Lender Acquisition Makes Sense
Even though the Supreme Court dealt a blow to SoFi Technologies, this doesn’t mean that investors should give up on the app-based bank altogether. For the long term, what’s important is that SoFi is differentiating itself from failed banks in 2023.
You might have already heard that SoFi Technologies is offering up to $2 million worth of Federal Deposit Insurance Corporation (FDIC) insurance per customer account. That’s a lot more protection than the $250,000-per-account industry standard. So, SoFi is definitely being proactive in reassuring its clients that the company is different from Silicon Valley Bank and Signature Bank.
Additionally, SoFi Technologies is diversifying its business model by acquiring a mortgage lender known as Wyndham Capital Mortgage. Consequently, SoFi’s customers can access Wyndham’s “intelligent and scalable platform that has set the industry standard for a fully digital mortgage experience.”
SoFi is known for catering to young bankers, including millennials and Zoomers. By acquiring Wyndham’s platform, SoFi Technologies can appeal to first-time home buyers. This should help to broaden SoFi Technologies’ business operations beyond student loan refinancing and other loan types. Over time, it could provide a significant revenue source for the company.
What You Can Do Now
SoFi Technologies might encounter problems in the short term due to the Supreme Court’s aforementioned ruling. Hence, there’s no need to be hasty if you’re looking to invest in SoFi.
Yet, it can still make sense to take a share position in SoFi Technologies after the price goes down. So, consider setting a limit order to buy SOFI stock at $5. Then, just hold your shares throughout 2023 for potentially terrific returns.
On the date of publication, David Moadel did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.