Fintech
The SOFI Stock Puzzle: An Undervalued Fintech Gem or an Overvalued Phenomenon?
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As for stocks with turnaround potential, SoFi Technologies (NASDAQ:SOPHIE) remains one of the first options on my watch list at the moment. From here, Sofi stock looks good.
The company provides a revolutionary digital financial platform for millions of users seeking seamless banking solutions.
Originally focused on student loans, SoFi now offers banking services, investing tools, and more through its intuitive app.
What sets SoFi apart is its focus on students and young professionals, offering straightforward, beginner-friendly financial products and support.
SoFi has enjoyed strong customer loyalty as existing users have adopted more services, driving its growth strategy through competitive pricing and intuitive interfaces.
Let’s now look at some more reasons why this fintech stock seems worth buying after its recent decline.
User growth is increasing rapidly
Over the past year, SoFi has done nothing but thrive and grow rapidly. From a digital growth perspective, SoFi has performed well. The company has grown its user base from 1 million in 2020 to its current state of 8 million users.
Although the company is down 73% from its peak price, SoFi remains an attractive stock to own as it offers a 4.6% interest rate and expansive financial services.
Additionally, the company has distinguished itself with unique offerings such as professional advice and member events, challenging traditional banks such as Bank of America (London share:BAC) AND JPMorgan Chase (London share:JPM).
Its lending segment, which focuses on personal loans, mortgages and student loans, generated $330 million in net revenue in the latest quarter, driving SoFi’s profitability.
SoFi achieved a turnaround by cutting costs and improving services, posting a solid financial performance with $88 million in net income, supported in part by a one-time debt repayment.
Regular trading contributed $29 million. Despite a market cap of $7.4 billion and a price-to-earnings ratio of 43 times, some are debating its post-2020 valuation highs.
SoFi’s long-term potential lies in expanding its market share and fintech products, but risks such as competition, regulation, and technological change continue to hinder this stock from a valuation perspective.
Anthony Noto is bullish on SOFI
SoFi CEO Anthony Noto recently showed strong confidence in his company by purchasing 30,715 shares at $6.48 each, for a total of $199,110. This purchase increased his personal holding to 8.12 million shares.
Its total insider purchases for 2024 were $797,342. Since SoFi went public, insiders have sold $1.22 billion in shares and purchased $16.13 million, with Noto accounting for $14.88 million or 92% of insider purchases, with no shares sold.
SOFI stock looks like a decent bet
While it has some short-term headwinds, SoFi’s positives still outweigh the negatives. With a low valuation and a price-to-sales ratio of 2.8 times, the stock appears undervalued.
I believe that investors interested in fintech have a good option in SoFi, if the company can make it happen in the future.
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.
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.