Shares of SoFi Technologies Inc. rose more than 5% on Wednesday as Bank of America turned bullish on shares of the neo-banking firm.
Bank of America’s Mihir Bhatia upgraded the stock to buy from neutral, writing that the name has “catalyst potential” given upcoming opportunities in student loans as well as potential returns from recent moves in marketing.
faced an ‘overhang’ on student loans as President Joe Biden continued to push back the timing of a moratorium on loan repayments, but he announced in late August that the government would forgive $10,000 in loans to borrowers who won. less than $125,000 a year and ending the payment hiatus early in the new year.
See more: Biden forgives $10,000 in student loans, $20,000 for Pell grant recipients
The move suggests a “light at the end of the tunnel” for SoFi, according to Bhatia.
“Student loan refinance is SOFI’s most profitable product and loan forbearance has been surpassed for SOFI both fundamentally (as demand was stalled for a high incremental margin product), as well as sentiment, as investors still did not know when demand would pick up,” he wrote. .
Greater clarity on the government’s plans “should set the stage for student loan applications to pick up at the end of 4Q22 as borrowers start receiving payment notices from loan officers,” Bhatia said.
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Additionally, he thinks SoFi could leverage its marketing around the National Football League, as the company’s name sits atop the Los Angeles stadium where the Rams and Chargers play their games. SoFi is also working on a branding campaign with Chargers quarterback Justin Herbert, he said.
“Our analysis indicates that interest in the SOFI brand increases on Sundays, particularly when Los Angeles teams are playing home games,” Bhatia wrote.
SoFi shares have gained 4% in the past three months, although they have fallen 61% over a 12-month period. The S&P 500 SPX,
is up 4% in the last three months, but down 12% year-over-year.