What Happened?
Shares of digital financial services company SoFi Technologies (NASDAQ: SOFI) jumped 5.1% in the afternoon session after investors reacted to the company's strong business momentum and recent positive financial results. The positive sentiment appears driven by the company's strong business performance, particularly in its core lending segments. This momentum is reflected in the company's broader second-quarter results, which included a 44% rise in adjusted net revenue, signaling robust overall growth.
The shares closed the day at $26.15, up 4.6% from previous close.
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What Is The Market Telling Us
SoFi’s shares are extremely volatile and have had 41 moves greater than 5% over the last year. In that context, today’s move indicates the market considers this news meaningful but not something that would fundamentally change its perception of the business.
The previous big move we wrote about was 3 days ago when the stock gained 7.4% on the news that Federal Reserve Chair Jerome Powell's dovish remarks signaled that interest rate cuts may be warranted. Federal Reserve Chair Jerome Powell struck a notably dovish tone, signaling that interest rate cuts may be warranted if the economic slowdown deepens. This pivot is significant for high-growth companies like SoFi, which are sensitive to interest rate expectations. Lower rates reduce the discounting effect on future earnings and decrease borrowing costs, bolstering valuations for growth stocks. The favorable macro environment comes as SoFi has demonstrated strong underlying performance. The company's stock has already risen significantly this year, supported by factors including a robust second-quarter performance and impressive growth in its lending platform. Following its recent results, Mizuho raised its price target for SoFi to $26, and Needham increased its target to $25, maintaining a Buy rating.
SoFi is up 85.4% since the beginning of the year, and at $26.17 per share, has set a new 52-week high. Investors who bought $1,000 worth of SoFi’s shares at the IPO in November 2020 would now be looking at an investment worth $2,499.
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