Fintech
SoFi Stock Alert: Why This Struggling Fintech Could Skyrocket
SoFi Technologies (NASDAQ:SOPHIE) is a fintech growth stock that has been a rather underperforming stock in recent years. Despite its recent rally in the past month, SOFI stock is still down about 75% from its 2021 peak, suggesting that many long-term growth investors may have lost faith in this once-rising name.
The company’s status as a leading fintech has certainly been bullish in 2021, as banking activity peaked while interest rates remained ultra-low. However, in this era of tighter monetary policy, sentiment on Wall Street has clearly shifted toward SoFi and its fintech peers.
That said, recent results have been strong. In Q1 2024, SoFi reported adjusted net revenue of $581 million, up 26% year over year and growing consistently over the past 12 quarters. Adjusted EBITDA also increased 91% to $144 million, with analysts expecting a break-even year and EPS of two cents, beating estimates.
Here’s why SOFI stock might be a fintech company worth buying right now.
Strong digital bank
SoFi has operated primarily as a digital bank, offering fintech services through Galileo and Technysis. Starting with student loans, the company has expanded into a diversified banking platform through its app, a model that does not require physical branches. This approach facilitates low-cost cross-selling on the company’s platform.
SoFi also reported a significant improvement in membership, with total users growing from 1 million to approximately 8.1 million over four years. The platform also received a 4.8-star rating on the App Store with 350,000 reviews, demonstrating strong user satisfaction across the board.
Investors also received encouraging news as SoFi’s book value per share began to rise significantly in late 2023. This increase, combined with a decline in its stock price, has made SoFi less expensive than established banks. It makes sense that SoFi, a less proven bank, is trading at a discount. As its book value continues to rise, investors could see strong returns.
Despite past challenges, SoFi’s improved valuation and rising book value position it for better future stock performance.
Why Investors Might Want to Check Out SoFi
Despite the losses, SoFi has invested aggressively in customer growth, adding more than 600,000 new members in the first quarter, up 44% year over year. Adjusted net revenue increased 26% to $581 million, with 2024 projections for more than 75% growth in financial services revenue. As SoFi transitions from student loans to a diversified financial services model, its primary revenue is still from loans.
Analysts see significant growth potential, particularly in expanding its credit card business and technology platform. In addition, CEO Anthony Noto has added confidence by buying more shares.
SoFi is also strengthening its balance sheet, with a book value of $608 million and continuing to improve. This strong financial position supports growth initiatives and resilience against economic fluctuations. Continued revenue growth and improved profitability highlight SoFi’s scalable business model, making it one of the best hidden gems in the market.
Green light for SOFI
Is SoFi a buy? It depends on your individual preferences and risk tolerance. For investors looking for quick gains, the future is uncertain. For investors who aren’t as concerned about risk, this is a stock that can certainly add to a portfolio’s return profile, especially over longer time periods.
In my opinion, investors bullish on the fintech space may certainly want to consider SoFi. This is a company with strong long-term growth potential in the student loan space (private refinancing activity should pick up when interest rates drop), with many consumers now looking for digital banking options over the old guard. If this trend continues, there is a lot to like about how SOFI stock is positioned right now.
As of the date of publication, Chris MacDonald did not hold (either directly or indirectly) any position in the securities mentioned in this article. The views expressed in this article are those of the author, subject to InvestorPlace.com policies Publishing Guidelines.
As of the date of publication, the responsible editor did not hold (either directly or indirectly) positions in the securities mentioned in this article.
Chris MacDonald’s love of investing led him to earn an MBA in Finance and hold several executive roles in corporate finance and venture capital over the past 15 years. His background as a financial analyst, combined with his passion for finding undervalued growth opportunities, contribute to his conservative, long-term investment perspective.