SoFi Technologies stock price has gone parabolic as investors cheered the strong quarterly results. The shares jumped by more than 25%, bringing the company’s market cap to over $7.36 billion. Still, the shares are about 67% below the highest level in November last year.
Why did SoFi shares crash?
SoFi Technologies is a leading fintech company that has operations in several important sectors of the economy. Its primary business is in consumer lending and student loans in particular. It also offers other services like stocks and cryptocurrencies trading, savings accounts, and insurance among other solutions. It recently received a banking charter.
Like other technology companies like Affirm, Shopify, and SquareSpace, the SoFi stock price has struggled in the past few months as investors worry about growth. In other words, companies that did extremely well during the pandemic have now come under pressure.
For SoFi, the situation was made worse by the moratorium of student loans in the US. As a result, the firm lost a substantial amount of income as most people kept off their loans. Progressives are also advocating for student loan cancellation.
SoFi Technologies share price has also dropped sharply because of the weak performance in the stock and cryptocurrencies industry. This performance has led to weak performance of its brokerage business. This is in line with the performance of companies like Robinhood and Coinbase.
Why did SoFi Technologies surge?
The SoFi stock price jumped sharply after the company published its Q2 results. The company said that its adjusted revenue rose by 50% from the same quarter in 2021. Its revenue was over $356 million. This was the eighth straight quarter of positive adjusted EBITDA.
Further, the newly launched SoFi Bank hit over $2.5 billion in deposits. Lending revenue rose by 46% to $251 million while its financial services net revenue rose by 78% YoY to $30 million. Its technology platform revenue rose to $84 million. Most importantly, SoFi added over 450k new members, bringing the total users to over 4.3 million.
Banking is an important part of SoFi’s business story because it lowers the cost of funding since it can use customer deposts. In a statement, the company’s CEO said:
“In Q2 alone, the difference in our deposit cost of funding and warehouse cost of funding was approximately 100 basis points, and that delta will continue to grow in a rising rate environment.”
SoFi stock price forecast
The daily chart shows that the SoFi stock price has been in a strong bearish trend in the past few months. Recently, however, there have been signs of the decline bottoming. It has remained slightly above the ascending trendline shown in green.
SoFi Technologies stock went parabolic on Wednesday and reached a high of $8.15, which was the highest level since April 7th of this year. This was a notable price since it was the highest point on May 27th. It has also moved above the 25-day and 50-day moving averages while the Relative Strength Index (RSI) moved above the neutral point.
Therefore, the stock will likely continue rising as investors focus on the ongoing recovery. If this happens, the next key level to watch will be at $12.46, which is along the 38.2% Fibonacci Retracement level. A drop below the support at $7 will invalidate the bullish view.