SoFi Technologies Stock Is Up 15% Over The Past Month: What's Going On?

SoFi Technologies Inc SOFI shares are trading flat Thursday at $7.53 and higher by some 15% over the trailing month amid anticipation of key economic data.

Shares are trading higher in recent sessions due to expectations of a potential interest rate cut by the Federal Reserve, which would lower borrowing costs and increase demand for SoFi's lending products.

What Happened: Thursday’s disappointing employment data increased the likelihood that the Federal Reserve might cut interest rates by 50 basis points. If the Fed cuts rates, it will lower borrowing costs for consumers and businesses.

The likelihood of a 50-basis-point rate cut at the Sept. 18 FOMC meeting also increased slightly on Tuesday, as manufacturing data for August showed further contraction.

Why This Matters: As SoFi offers various lending products, including student loans, personal loans and mortgages, lower interest rates make borrowing more attractive to consumers, which can lead to higher demand for SoFi's services.

SoFi additionally benefits from lower rates not only through increased loan volume but also from improved profit margins. With cheaper access to capital (due to lower interest rates), SoFi can offer loans at competitive rates while maintaining its margins, which positively impacts its profitability.

Growth in Refinancing Activity: A rate cut environment often spurs refinancing activities, as consumers seek to refinance existing loans at lower rates. SoFi, which provides student loan refinancing and mortgage refinancing, could see increased business from individuals looking to take advantage of better borrowing terms.

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Higher Valuations for Growth Stocks: Lower interest rates tend to boost growth stocks, especially those in the fintech sector like SoFi, as the future cash flows of such companies are discounted at a lower rate. This can lead to higher valuations for firms like SoFi.

Reduced Risk of Defaults: Lower interest rates can also ease financial pressure on borrowers, reducing the risk of defaults on loans. This can positively affect SoFi's loan book, as it lowers the chance of delinquencies, thus improving the overall health of its lending business.

According to data from Benzinga Pro, SOFI has a 52-week high of $10.49 and a 52-week low of $6.01.

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