Morgan Stanley analyst Betsy Grasec said SoFi has a "powerful revenue growth story," despite rising competition from other challenger fintech companies. She expects SoFi's customer base to double over the next 2 years to 5.3 million from 2.6 million after more than doubling over the past year from 1.2 million.
"SoFi is unique. It is a challenger consumer finance company that is leading with lending; specifically refinancing a high yield student loan into a lower rate," Graseck said. "Lending is the toughest part of consumer finance as you need to understand credit and deliver excellent customer service."
SoFi shares on Monday closed 13.4% higher to $18.39. The stock is up more than 45% year to date, but well off of its February high.
Morgan Stanley also notes that student loan deferment will come to an end on January 31, 2022 after the U.S. government put federal student loans into deferment in March 2020.
The company sees a sharp 154% compound annual growth rate in SoFi's financial services revenue over the next two years due to the company's reputable brand, strong digital banking platform and expanding product set.
Morgan Stanley's bull case for a $34 price target is predicated on SoFi obtaining its bank charter by early 2022, which could provide more than $200 million of revenue upside from holding loans longer before sale as well as lower cost of funds.