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SoFi Technologies stock was down on Friday.
Justin Sullivan/Getty Images
Sofi Technologies
the stock was down after the Supreme Court blocked President Joe Biden’s plan to cancel student loans.
What’s bad for borrowers could be good for the financial services company, but that wasn’t enough to lift shares on Friday. The stock fell 2.7% to $8.48 in Friday’s latest trades, while the
S&P500
increased by 1.2%. So far this year,
SoFi
won 81%.
The student loan forgiveness plan was designed to forgive up to $20,000 in student debt for certain borrowers, and US Census Bureau data indicates that the plan would have eliminated the balances of 29% of federal borrowers.
Although disappointing for borrowers, Friday’s decision could benefit SoFi (ticker: SOFI). Here’s why: In its most recent quarter, the financial services company saw student loan numbers drop 47% year-over-year, highlighting an obvious place for growth when loan repayments pick up and that borrowers refinance.
Had the loan cancellation plan passed, part of that refinance market would have disappeared – now that market remains an opportunity.
But the stock’s decline on Friday suggests investors either expected the move — indicating it would have already been priced into the stock — or that the refinancing won’t be the boost the company is getting. expect it to be.
JP Morgan voiced those concerns earlier this week. On Thursday, analysts led by Reginald Smith wrote that SoFi may be overly optimistic about a refinancing windfall. SoFi management pegs the multi-year addressable refinancing opportunity at around $200 billion, while JP Morgan expects around half that, or closer to $90 billion.
“We found that very few people actually refinance their student loan debt with private lenders,” Smith wrote in a report Thursday. “We find that less than 2% of outstanding student loans were refinanced in 2019, despite historically low interest rates.”
Earlier this month, analysts at BofA Securities downgraded their SoFi rating to Neutral instead of buying, writing that the recovery in student loan repayments “is positive, but was already in numbers for the most part.”
Some analysts, however, remain more optimistic.
In a Friday report, analysts at Jefferies wrote that the “net impact (magnitude uncertain) should be a tailwind for refinancing volumes” at SoFi, starting in the fourth quarter of this year.
“Based on management’s comments, these will primarily be individuals who took advantage of the payment moratorium and are now looking to lower their monthly payments through refinancing, even at a higher interest rate,” the analysts added. .
Among analysts polled by FactSet, 37% rate stocks as buy, 53% as neutral and 11% as sell.
Write to Emily Dattilo at emily.dattilo@dowjones.com