SoFi Technologies (NASDAQ:SOFI) is quickly emerging as a one-stop-shop for the complete financial needs of retail customers. The company has proved its strength by expanding the customer base and is on its way to reporting a strong third quarter. SoFi stock is up almost 25% in the last seven trading sessions.
From its start as private student lending before moving into personal loans, investment products and financial service products, the company has rapidly grown the customer base and reached 2.56 million by the end of the second quarter.
I believe SOFI stock has ample potential to grow and reap strong returns for investors. Let’s dig deeper into my investment thesis.
Impressive User Growth Fuels SOFI Stock
SoFi Technologies certainly has an impressive balance sheet with strong earning numbers but the user growth is the prize here. The company has been able to accelerate user growth at a rapid rate, a sign of the company’s product strength. SoFi saw the member count increase 113% year over year in the second quarter.
The fourth quarter of 2020 saw 90% YoY growth while the first quarter of 2021 saw a 110% rise. Not all companies see such a huge gains in user growth in such a short time. It shows the strength of its products and services.
I think SoFi sets itself apart by offering a one-stop-shop to the customers. It has eliminated the need to head to a traditional bank or an investment agent to get details about the bank balance or investment portfolio.
Interestingly, this is the eighth-consecutive quarter that saw a rise in the growth rate, jumping from a 37% increase in Q3 2019 to 113% in the most recent quarter. SoFi has the potential and ability to keep this going and if it continues to report strong user growth, the future of the company could get very interesting.
The company expects the multi-product members to hit 775,000 by the end of the year. The good thing about SoFi is that the growth is not only impressive but it is also increasing rapidly and this is what will take SOFI stock higher in the coming quarters.
The fintech industry has evolved with time and consumers are no longer relying on the traditional banks but looking for online alternatives. This gives SoFi a stronghold in the industry.
Lots of Love From Analysts
I am not the only one bullish on SoFi stock. Morgan Stanley analyst Betsy Grasec has an “overweight” rating with a price target of $25 citing a strong revenue growth story. This has already given a push to the stock.
Jefferies analyst John Hecht has a “buy” rating on the stock with a target price of $25. The analyst is of the opinion that the company will be able to drive strong user growth and high margin expansion.
Further, Mizuho’s Dan Doley initiated coverage on SoFi stock with a “buy” rating and a target price of $28 stating that the company is in a strong transition toward the mobile-first super app neo bank.
The Bottom Line
SoFi is here to disrupt the fintech industry and its year-on-year user growth is proof that consumers are enjoying its products. It caters to retail customers through its one-stop platform. The company is not profitable yet but it has reported positive cash flow. This is a sign that the company is doing something right and offering products that work.
SoFi will soon get a bank charter and it will be able to streamline the operations in different ways. I believe the stock is a good buy at current levels and it will soar in the coming years. Buying SOFI stock below $20 is a great bet anytime, add it to your portfolio.
On the date of publication, Vandita Jadeja 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.
Vandita Jadeja is a CPA and a freelance financial copywriter who loves to read and write about stocks. She believes in buying and holding for long-term gains. Her knowledge of words and numbers helps her write clear stock analysis.