Investors have been split on how to value the fintech company SoFi , but the potential of a coming recession is throwing new light on the stock for Mizuho. The company got its start in lending but has since expanded its services to include deposit accounts and investing services. For personal loans, it boasts an average borrower FICO score of 746, which should make the stock “resilient to credit cycles,” analyst Dan Dolev said in a note Thursday. “During the financial crisis, super prime borrowers (FICO of 720+) gained significant share of the total loan volume during those two years,” he said. “Super prime borrowers received an outsized portion of volume relative to non-super prime borrowers during the economic downturn and subsequently held an elevated share of the mix when the recovery occurred.” The firm reiterated the stock as a buy on Thursday. It also lowered its price target on SoFi to reflect a different valuation methodology and more “reasonable” near-term upside from current levels, Dolev said. “SOFI is now more similar to a bank than a pure-play FinTech and therefore we now reach our valuation based on a sum-of-the-parts weighted average terminal margin, which we believe better reflects the long-term margin potential for SOFI’s three business segments,” he said. Mizuho lowered its price target to $7 from $9 per share. That still implies upside of about 18% from where the stock closed Wednesday. The stock benefits from “the best of both worlds,” he added. “Being a bank helps keep funding costs low … having the allure of a branded, next-gen FinTech creates a powerful funnel for low customer acquisition costs [and] high long-term value customers.” Mizuho said SoFi is heavily discounted compared with Visa, Mastercard, Block and PayPal.
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