SoFi Technologies (SOFI) - Get Free Report surged higher after analysts at Jefferies initiated coverage of the online financial services company with a buy rating Wednesday, calling it a "flywheel of growth opportunity."
"An industry leader in the rapidly expanding neobank space, SoFi boasts an exhaustive consumer finance product suite, a robust digital platform, and omnichannel execution," analyst John Hecht wrote.
The firm says the cross-selling opportunity via the company's "Flywheel" is a catalyst for margin return expansion as the program is designed to cross-sell the company's broad suit of products, swelling the number of members who will use higher-cost products.
Member growth is the key to SoFi's strategy, Hecht said, and the firm currently expects more than 46% average revenue growth through 2025.
"We believe this highly synergistic business model, which encourages significant cross-sell activity, will propel user growth, margins, and profitability over the long term," said Hecht, would put a $25 price target on the stock.
SoFi shares were marked 8.2% higher in early Wednesday trading to change hands at $16.44 each following the Jefferies upgrade.
Upcoming catalysts for the company include the company making progress in its quest to receive a Federal bank charter after it recently acquired a banking institution and is in the process of transitioning that charter.
"Given SoFi's numerous business lines and streams of income, as well as the fact that we do not expect positive earnings to start until FY24, we believe a sum-of-the-parts valuation framework is warranted," Hecht said.