SoFi Technologies, Inc. (NASDAQ:SOFI) saw its stock climb approximately 4.3% in afternoon trading on Thursday, buoyed by an analyst upgrade from Goldman Sachs Group (NYSE:GS) and the debut of a new exchange-traded fund. The move comes as investors reassess the company's product mix and growth trajectory ahead of its second-quarter earnings report.
Goldman Sachs lifted its price target on SoFi to $21 from $17, while maintaining a Neutral rating. The new target implies roughly 14% upside from the stock's current level of $18.49. However, shares remain nearly 30% below their 52-week high of $32.73, and the stock is down 29.77% year-to-date, according to MarketWatch data. This latest rally appears more like a recovery play than a breakout, as traders attempt to recoup earlier losses.
SoFi rolled out its new SoFi Social 50 Income ETF (NYSEARCA:SFYI) this week, a fund that tracks the 50 most widely held U.S.-listed stocks in SoFi Invest self-directed accounts. The fund employs covered calls and call spreads to generate additional income, capping some upside potential. It follows the existing SoFi Social 50 ETF (NYSEARCA:SFYF), which holds positions in Tesla, Inc. (NASDAQ:TSLA), NVIDIA Corp. (NASDAQ:NVDA), and Amazon.com, Inc. (NASDAQ:AMZN). Brian Walsh, SoFi's head of advice and planning, said the new fund offers income-focused investors "another way to pursue their objectives."
The ETF's near-term financial impact is expected to be modest. With a 0.73% gross expense ratio, the fund would generate $7.3 million in annual fees for every $1 billion in assets, before revenue sharing. SoFi acts as brand sponsor and handles marketing, while Tidal Investments serves as the investment adviser. For context, SoFi reported $386.8 million in fee-based revenue in the first quarter, out of total net revenue of $1.1 billion. Net income for Q1 was $166.7 million, and CEO Anthony Noto described the period as one of "durable growth and strong returns." Member count jumped 35% year-over-year to 14.7 million.
SoFi's valuation sits at a price-to-earnings ratio of 41.1x, placing it between consumer lenders like Ally Financial Inc. (NYSE:ALLY) at 11.0x and trading platforms like Robinhood Markets, Inc. (NASDAQ:HOOD) at 56.5x. The premium multiple reflects investor expectations that SoFi can grow its fee-based revenue streams from ETFs, crypto, advisory, and brokerage businesses, even though these segments remain relatively small. Ally's lower multiple aligns with its deposit-backed lending model.
Market conditions also provided tailwinds. Wall Street rallied as chip stocks bounced, with Micron Technology Inc. (NASDAQ:MU) leading semiconductors higher. Ross Mayfield, investment strategy analyst at Baird, told Reuters, "This is still very much an AI bull market." The risk-on tone benefits high-beta fintechs like SoFi, often as much as company-specific news.
Investors should note the risks associated with the new ETF, including potential losses, no guarantee of monthly payouts, and options strategies that may cap returns. Additionally, SoFi's Technology Platform revenue dropped 27% in Q1 after losing a major client, underscoring that the fintech platform story still needs to deliver.
The key event ahead is SoFi's Q2 earnings report, scheduled for July 29 before the market opens. Analysts and investors will focus on whether deposits, loan originations, fee revenue, and tech-platform accounts can demonstrate growth beyond the market's recent bounce, justifying the stock's premium valuation.
