Fintech
Why SOFI stock is a fintech to own for the next 10 years
Losing over 18% of its value due to a difficult market landscape, SoFi Technologies (NASDAQ:SOFI) the stock remains a great choice. It has outperformed its competitors and it shows in their previous earnings reports.
The company has beaten market estimates twice in a row, particularly across financial services and technology platforms. These segments have seen significant sales growth, underscoring SoFi’s diversified revenue streams beyond lending.
It’s SoFi earnings report revealed a 26% year-over-year increase in net sales, with a 33% increase in the financial services segment. The company has maintained solid revenue despite concerns over high interest rates.
While there is apprehension about the focus on lending, management’s conservative approach expects a slight decline in revenue. However, revenues from other segments are steadily growing, promising an overall improvement in both revenues and profits.
With a growing user base and potential fee cuts, SoFi Technologies presents an attractive long-term investment opportunity.
Solid financial position
Moving into a fintech company hasn’t been easy for SoFi Technologies, especially when speculating about its future. Despite the recent earnings setback, SOFI remains down 25% for the year, although it is up 7.23% since April 30.
Analysts suggest a “transition year” ahead, while others predict a strengthening with a full banking license, prompting closer scrutiny of forecasts.
In First quarter 2024, SoFi demonstrated robust growth with a 35% increase in both member count and product offerings. Beating expectations of earnings per share of $0.02, it delivered positive net income for the first time in the fourth quarter of 2023, signaling sustained profitability.
Despite a temporary decline in stocks after the strong performance, swing traders capitalized on gains of 30% from May 23-24.
SoFi has topped earnings expectations for seven quarters as of the third quarter of 2022, but a recent decline in revenue has raised concerns.
Despite this, the financial services segment is expected to grow 75% year-over-year in 2024, aiming to account for half of SoFi’s total revenues. Despite the high interest rate environment, SoFi expects to maintain lending revenue between 92% and 95% of prior year levels, supported by loan originations.
Bulls see 70% upside for SOFI Action
After a meeting with a senior executive from SoFi Technologies, analysts from Mizuho Securities reiterated their outlook optimistic, predicting a potential upside of 70%.
They rate SoFi a Buy with a $12 price target. SoFi’s guidance during its second-quarter earnings report suggested that lending revenue would remain between 92% and 95% of the prior year’s level, pushing investors investors to ask about loan growth.
Mizuho analysts observed cautious loan growth due to economic indicators, but found SoFi’s management sound. They appreciated the clarity on delinquent loan sales and remained bullish on SoFi. Trading in the lending, financial services and technology sectors, SoFi shares rose 2.8% to $7.14 on Monday.
SOFI is a strong buy
SoFi has expanded its offerings beyond bank loans and more, known for its intuitive interface and low-cost products. Its comprehensive services target young professionals and millennials, reflected in a 35% increase in subscriptions and number of products in the first quarter of 2024.
Management expects a 15% increase in adjusted net revenue for the second quarter and 16% for the full year. The financial services segment, growing 75% annually, excludes lending, including banking and investments.
This puts SoFi in a good light for the next few years, signaling investors to buy the stock now.
As of the date of publication, Chris MacDonald did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to InvestorPlace.com Guidelines for publication.
Chris MacDonald’s love of investing led him to earn an MBA in Finance and take on numerous leadership roles in corporate finance and venture capital over the past 15 years. His past experience as a financial analyst, combined with his fervor for finding undervalued growth opportunities, contribute to his conservative, long-term investment outlook.