Although new trends are part and parcel of the current market, there is one overarching theme; you cannot go wrong with technology. Considering how dominant tech companies are on the S&P 500 index, it comes as no surprise that disruptors dominate investing conversations at the moment. SoFi Technologies (NASDAQ:SOFI) is a tech disruptor making waves. SOFI stock is up 26.0% in the last month alone.
It is easy to see why. The fintech now reaches 2.56 million members, growing at triple digits year-over-year and accelerating sequentially with even higher numbers. These new members will drive SoFi’s future revenue growth as they become multi-product members.
The asset-light model is perfect for finance industry disruption. As a result, SOFI will continue to grow by leaps and bounds. Yes, the price will ebb and flow alongside the broader market. But there is nothing to suggest the long-term thesis is in any danger.
Mixed Earnings Shouldn’t Deter SOFI Stock Bulls
In the latest quarter, SoFi produced total net revenue of $166.3 million in its lending business, up from $95.9 million in the year-ago period, which includes 18,102 home loans, 981,440 product originations in the lending business, and 544,000 personal loan applications from clients who utilized its products to get a quick cash injection into their lives when they needed it most– during tough economic times.
Meanwhile, the company’s financial services segment finished at $17 million in revenue, a substantial jump over $2.4 million in the prior period. The directly attributable cost connected to the segment was $41.8 million, which brought the contribution loss to $24.7 million. It compares favorably with the situation last year, where directly attributable expenses of $33.3 million resulted in a contribution loss to $30.9 million.
SoFi saw a sharp increase in its technology business. You can thank last May’s acquisition of Galileo Financial Technologies for the outstanding performance in this area. This segment had nearly 79 million accounts as of Q2 2020, up from 36 million a year ago, and revenue grew by almost 60%.
Despite these positive results, SOFI stock fell nearly 12% in after-hours trading when the results were revealed. The main reason was news that SoFi expects a loss in the third quarter. EBITDA is expected in the range of negative $7 million to $3 million for Q3 while revenues are expected between $245 million and $255 million.
Meanwhile, Wall Street analysts are expecting a positive EBITDA figure of $11.8 million. But overall, for a company that doesn’t have a long history, these are excellent numbers.
Comprehensive Financial Ecosystem
One of SoFi’s most interesting aspects is its financial ecosystem. The app makes all options accessible on your phone while it keeps track of everything. It means you can manage finances more easily than ever before.
Imagine opening an account with SoFi Money to supplement your current bank. But you can also invest in stocks and trade crypto because it is made available through the same platform. It increases the lifetime value of each member by reducing their relevant acquisition costs- all while increasing convenience for the end-user.
Certain investors have come up with a bearish view because of the diversification in the model. Though this might be viewed as a weakness, I see it more positively. SoFi’s ability to provide services for diverse needs will allow them greater access and opportunity than if they focused solely on one product or service alone — which would diminish revenue growth because there are other companies out there providing already what that company offers (though maybe not at such high quality).
Sofi has always been about being diversified, offering many different financial products through multiple providers under one roof, so you don’t have spreadsheets full of transactions anymore when all your loans need attention. And the best part is, the company is not done innovating.
Although it has a lot of cash already, it has announced a convertible notes offering of $1.1 billion. The investors were not happy about the leverage and possible future dilution, leading to a selloff. However, SoFi needs these funds to meet liquidity requirements for a bank charter. Purchasing Golden Pacific Bank was a part of this aim. And this is a step in the right direction as well.
What Does the Future Hold for Sofi Stock?
Investors are often on the lookout for innovation-driven opportunities and forward-looking businesses that never hesitate to take risks when it’s needed most. SoFi’s business is healthy and growing. There is little to suggest this growth will slow down anytime soon. The only issue investors might have is when to enter since shares are riding high at the moment.
The chart above shows the price is in an uptrend. However, it all depends if you want to take a long-term approach. Shares have regained lost ground after the earnings report. But there will be blips on the way, and you can capitalize on those. On the other hand, if an investor takes a long-term approach, SOFI stock is likely to have an excellent one-year return.
On the publication date, Faizan Farooque did not have (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 the InvestorPlace.com Publishing Guidelines.
Faizan Farooque is a contributing author for InvestorPlace.com and numerous other financial sites. Faizan has several years of experience in analyzing the stock market and was a former data journalist at S&P Global Market Intelligence. His passion is to help the average investor make more informed decisions regarding their portfolio.