1 Wall Street analyst raised his price target on shares of SoFi Technologies by 151 TP3T. Why He's Right

SoFi Technologiesfirms(NASDAQ: SOFI)Last month's announcement of the planned sale of a $750 million convertible bond took investors by surprise. Predictably, SoFi's share price fell after the news of the big launch - down 15% in one day - but has remained stable over the month since.

Now, one Wall Street analyst thinks it's safe to hold SoFi again.

On Thursday, Keefe, Bruyette & Woods analyst Timothy Switzer raised his price target on SoFi shares by 15% to $7.50 per share. That's not much more than the stock price, of course-which is why Switzer only upgraded the stock to "Market Perform" and didn't say "Buy."

But even so, Switzer no longer recommends that investors sell SoFi stock.

Why are you no longer selling SoFi stock?

This makes sense. To date, SoFi's stock price has fallen nearly 26%, eliminating much of the risk. Switzer may still validate it by questioning SoFi's "earnings sustainability". Nevertheless, with the stock price falling so dramatically, investors are no longer buying into the assumption that earnings will remain high.

The best part: investors no longer have to buy into the possibility of higher earnings.

Consider this: SoFi will use most of the new cash to buy back the preferred stock, which previously paid a dividend of 12.51 TP3T.1.25%Ultimately, SoFi's annual interest costs should be reduced by more than $65 million. Ultimately, SoFi's annual interest costs should be reduced by more than $65 million. This cash should go immediately to the company's bottom line, making it easier for SoFi to report its first GAAP profitable year in 2024 and continue to grow profits in the years ahead.

Of course, SoFi stock's 2024 P/E of 92.5x doesn't look cheap since earnings are only expected to be $0.08 per share this year. However, if profits grow as expected, SoFi could reach $0.50 EPS in 2026 at a forward P/E of 15 times the company's previous price. At this valuation, SoFi stock is worth buying.

Should you invest $1,000 in SoFi Technologies now?

Consider this before buying shares of SoFi Technologies, Inc:

Motley Fool Stock AdvisorA team of analysts have just named what they think are the best values for investors.10SoFi Technologies is not one of the 10 stocks listed on ....... The 10 stocks that made the list could generate huge returns in the coming years.

Stock AdvisorIt provides investors with an easy-to-understand blueprint for success, including guidance on building a portfolio, regular updates from analysts, and two new stock picks each month. Since 2002, StockAdvisorThe service has more than doubled the return on the S&P 500 Index.

View these 10 stocks

*Stock Advisor's Circular as of April 4, 2024

Rich Smith does not own any of the shares listed above.The Motley Fool does not own any of the shares listed above.The Motley Fool has a disclosure policy.

1 Wall Street analyst raised his price target on SoFi Technologies by 151 TP3 T. Why is he right?