At long last, after taking a beating all year long SoFi Technologies (NASDAQ:SOFI) stock had a good day. On Nov. 1 share shot higher after SoFi released its third-quarter 2022 financial results.
Yet, those gains were quickly coughed up as SOFI stock retreated over the next couple of days. Investors must ask themselves: Why did this happen, and should I be concerned?
The answer to the second question is simple enough: Yes, you should be concerned about SoFi Technologies. One seemingly positive quarterly report doesn’t constitute a trend or even a pattern. Besides, SoFi’s results weren’t perfect, by any means.
Along with all of that, investors can’t afford to ignore what the U.S. Federal Reserve is doing. Sorry to be the bearer of bad news, but holding SoFi shares could be tantamount to “fighting the Fed,” which is rarely a wise investment decision.
The Rise and Retracement of SOFI Stock
Impressively, SOFI stock gapped up on Nov. 1, opening at around $6.31 after closing the previous day near $5.45. This wasn’t a miracle from the heavens, but just the market’s knee-jerk reaction to SoFi Technologies’ Q3 2022 fiscal report.
Analysts had expected SoFi to post an earnings loss of 10 cents per share. The actual result was a loss of 9 cents per share, which isn’t exactly a massive beat. It was a still a beat, though, and apparently Wall Street celebrated with a huge relief rally.
It didn’t take long for that rally to fizzle out, though. By the end of Nov. 1, SOFI stock was already down to $5.72. Fast-forward to 2:00 p.m. Eastern on Nov. 4, and the share price was $5.08, significantly below the pre-earnings level. It’s climbed back a bit since then, but not much.
Again, the earnings beat wasn’t a wide one. Alarmingly, SoFi Technologies incurred a $75.8 million comprehensive loss during 2022’s third quarter. And, the SoFi share price remains far below $15 and change, which is where it started this year.
SOFI Stock Is ‘Polarizing,’ and Not Fed-Friendly
As SOFI stock gave up its post-earnings gains and then some, Keefe, Bruyette & Woods analyst Michael Perito called it “polarizing.” This is a fair assessment of a love-it-or-hate-it asset that’s prone to bouts of volatility.
Perito assigned a “neutral” rating and a $6 price target on SoFi Technologies shares, but this might actually be too generous. Perito has lingering “questions” pertaining to SoFi’s “loan origination and sale fees, in addition to the lower technology revenue/profit run-rate.”
The analyst also noted the “current macroenvironment,” which will likely present persistent challenges to already-unprofitable SoFi Technologies. By “current macroenvironment,” we can reasonably surmise that Perito is referring to high inflation and rising interest rates.
These macro factors could make it increasingly difficult for SoFi to successfully conduct its lending business.
Uttering the words, “We have a ways to go,” Federal Reserve Chairman Jerome Powell clearly signaled that the central bank doesn’t plan to end its rate-hike path anytime soon – and this doesn’t bode well for SoFi Technologies.
Stay Cautious with SOFI Stock
SOFI stock gets a “D” rating as investors will, indeed have to “fight the Fed” if they invest in SoFi Technologies. Plus, the company’s quarterly earnings result wasn’t a huge Street beat.
SoFi is still an unprofitable business, and investors shouldn’t ignore that fact. So, while the bulls can cherry-pick positive data points if they want to, it’s still too early to declare victory and load up on SoFi Technologies shares now.
On the date of publication, neither Louis Navellier nor the InvestorPlace Research Staff member primarily responsible for this article held (either directly or indirectly) any positions in the securities mentioned in this article.