SoFi Technologies(SOFI 1.32%) recently shifted from a hyped-up growth stock to a profitable fintech powerhouse. Some investors took their gains as SoFi reached its goal of profitability, and SoFi stock is down 30% this year. It's now trading below $7 and close to its lowest-ever levels. Is SoFi stock ever going back up? Or should you avoid it?
SoFi is an all-digital financial services app that offers lending, banking, and other services. It gained renown for its easy-to-use interface and low-fee lending products, and it leveraged its popularity to launch a comprehensive financial services business that addresses many consumer pain points. It has become incredibly popular, resonating with its young professional and millennial cohorts, and membership has been soaring. Member count and product count both increased 35% year over year in the 2024 first quarter.
The increase in both membership and products accelerates the overall trajectory, and cross-selling new products also boosts sales at lower cost, leading to profitability.
After several quarters of reiterating that net income was on the way, SoFi came through with its first quarter of positive net income in the 2023 fourth quarter -- and its stock dropped. That trend continued with a second round of positive net income in the Q1 2024, plus guidance for third-quarter and full-year GAAP profitability.
What's going on?
There are several possible explanations for what seems like a strange reaction to SoFi's excellent performance and indications that it's going to continue.
One is that investors built up the price based on the potential. Now that SoFi has met its goal, investors are pocketing their gains. SoFi stock gained 116% in 2023, right before the Q4 results were released.
Another is that as it attains profitability, it's looking more like a typical bank stock, and bank stocks come with lower valuations. Consider Ally Bank, which is the top all-digital bank in the U.S. and in many ways a direct competitor with SoFi. Ally stock trades at a significant discount to SoFi.
That's not a compelling argument though, to me at least, because SoFi is growing revenue much faster than Ally, by 178% versus 8% over the past three years.
Is the best yet to come?
Management is guiding for adjusted net revenue to increase about 15% in the second quarter and 16% for the full year. The financial services segment is the fastest-growing right now, and it's expected to increase 75% year over year in 2024. These are the non-lending services like banking and investing.
Financial services, along with the technology platform, accounted for 38% of total revenue in 2023, and management expects that percentage to grow to 50% in 2024. Lending revenue is expected to be at 92% to 95% of 2023 levels, so there could be a slowdown there. Lending is still pressured from the high-interest-rate climate, although originations in all of its categories, personal, home, and student, have been increasing.
Whatever the reason, the plunging price seems extreme. At the current price, the valuation looks reasonable for a stock growing as fast and with as much potential as SoFi, and it might be undervalued right now. SoFi stock below $7 per share is a bargain, and in five years you'll thank yourself for buying it at this price.
Ally is an advertising partner of The Ascent, a Motley Fool company. Jennifer Saibil has positions in SoFi Technologies. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
(commonly known as SoFi) is an American online personal finance company and online bank. Based in San Francisco, SoFi provides financial products including student loan refinancing, mortgages, personal loans, credit card, investing, and banking through both mobile app and desktop interfaces.
stock below $7 per share is a bargain, and in five years you'll thank yourself for buying it at this price. Ally is an advertising partner of The Ascent, a Motley Fool company.
SoFi Technologies has 27.47% upside potential, based on the analysts' average price target. Is SOFI a Buy, Sell or Hold? SoFi Technologies has a consensus rating of Hold which is based on 5 buy ratings, 10 hold ratings and 3 sell ratings.
According to Wall Street analysts, the average 1-year price target for SOFI is 8.78 USD with a low forecast of 4.04 USD and a high forecast of 12.6 USD.
SoFi offers one of the highest savings rates in the industry, helping it draw in deposits that can fund loan originations. This is a clear indicator of its recent success. Moving deposits to SoFi could be the start of a customer potentially using many more of the company's products over time.
The Motley Fool has positions in and recommends Alphabet, Amazon, Microsoft, and UiPath. The Motley Fool recommends Alibaba Group and recommends the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft.
The 2% rule is a risk management principle that advises investors to limit the amount of capital they risk on any single trade or investment to no more than 2% of their total trading capital. This means that if a trade goes against them, the maximum loss incurred would be 2% of their total trading capital.
Do you know the Rule of 72? It's an easy way to calculate just how long it's going to take for your money to double. Just take the number 72 and divide it by the interest rate you hope to earn. That number gives you the approximate number of years it will take for your investment to double.
According to the latest long-term forecast, SoFi price will hit $7 by the middle of 2024 and then $10 by the end of 2025. SoFi will rise to $12 within the year of 2027, $15 in 2029, $17 in 2030 and $20 in 2034.
Yet, as a fast-growing, relatively young company, SoFi expands its deposit base and technology platform revenue, vital for long-term growth. SoFi connotes to see solid acceleration in terms of its member acquisition and product adoption, demonstrating profitability.
Largest shareholders include Vanguard Group Inc, BlackRock Inc., Silver Lake Group, L.L.C., VTSMX - Vanguard Total Stock Market Index Fund Investor Shares, NAESX - Vanguard Small-Cap Index Fund Investor Shares, Susquehanna International Group, Llp, State Street Corp, ARK Investment Management LLC, Citadel Advisors Llc, ...
SoFi reported its second consecutive quarter of GAAP net income, achieving $88.0 million in the first quarter of 2024, which includes a $59.2 million one-time benefit from exchanging convertible debt in the quarter. This compares to a loss of $34.4 million in the first quarter of 2023.
The 18 analysts with 12-month price forecasts for SoFi Technologies stock have an average target of 9.11, with a low estimate of 3.00 and a high estimate of 14. The average target predicts an increase of 30.33% from the current stock price of 6.99. * Price targets were last updated on Apr 30, 2024.
SoFi takes your security very seriously. Upon depositing funds into your SoFi checking and, or savings accounts (including vaults), the balance is FDIC insured up to $250,000 per account holder across all deposit accounts. Joint accounts will be insured up to $500,000.
Address: Suite 153 582 Lubowitz Walks, Port Alfredoborough, IN 72879-2838
Phone: +128413562823324
Job: IT Strategist
Hobby: Video gaming, Basketball, Web surfing, Book restoration, Jogging, Shooting, Fishing
Introduction: My name is Rev. Porsche Oberbrunner, I am a zany, graceful, talented, witty, determined, shiny, enchanting person who loves writing and wants to share my knowledge and understanding with you.
We notice you're using an ad blocker
Without advertising income, we can't keep making this site awesome for you.
