SoFi Technologies (NASDAQ:SOFI), the financial technology company, has had a rough month. After peaking at the close recently at $23.29 on Nov. 4, SOFI stock has been tumbling. By the end of trading on Dec. 16, it seems to have reached a bottom of $14.27 per share.
Since then the stock has been drifting higher, and finally reached $14.85 as of the close Dec. 28. I think there is a good chance that SOFI stock can continue to rise through next year.
As one analyst at Seeking Alpha put it, fintech companies, in general, have been hitting “headwinds” and SOFI stock was not exempt from this. However, the analyst also believes that the company will weather this storm just fine.
One reason is that the company aims to have a lifelong relationship with its clients. This means meeting their financial needs at every stage of their life. This includes loans, asset management, retirement products, savings products, insurance and more.
Where Things Stand With Sofi Technologies
Sofi reported stellar earnings on Nov. 10, with the release of its third-quarter financial results. The company said that it just produced its fifth consecutive quarter of positive adjusted EBITDA (earnings before interest, taxes, depreciation, and amortization).
Moreover, the company now has 2.9 million members. That is up 96% over the past year, giving it a huge base to which it can sell high numbers of financial products.
And that has been its goal all along. It started with student loans and eventually broadened out to all kinds of loans, including mortgages. The point has been to follow Millennials and others in their life-stages of financial growth.
Revenue on a non-GAAP basis was up 35% year-over-year (YoY) but its adjusted EBITDA was lower at $10.256 million vs. $33.5 million a year earlier. So, adjusted EBITDA was lower by 69% but it was still positive for the quarter.
On a non-GAAP basis, Sofi’s net revenue was up 28% to $277.19 million, slightly higher than the GAAP revenue.
Guidance for Q4
Moreover, this was substantially higher than Sofi’s prior guidance of $245 million to $255 million in revenue for the quarter (see page 11 of the shareholder letter.)
In addition, the company has guided for $272 million to $282 million for Q4. This represents 49% to 55% more revenue YoY. It seems likely that SoFi could exceed these numbers based on its historical outperformance.
SOFI now has a more diversified loan base, instead of focusing on student loans. In fact, 48.2% of its new loans originated this quarter were personal loans and 23.3% were home loans.
As a result, Sofi Technologies now expects to produce 2021 revenue of between $1.002 billion and $1.012 billion for 2021. In addition, the company expects to make adjusted EBITDA of between $28 million and $31 million. That gives it an adjusted EBITDA margin of between 2.8% and 3%. These are not very high numbers and will likely increase over time as the company gains operating leverage and profitability.
What to do With SOFI Stock
So far Sofi Technologies is not cash flow positive, even though it is EBITDA positive. I usually like to wait until a company is cash-flow positive before I try and put a value on the stock. In this case, then, we can look and see what other analysts are saying about the stock.
For example, 10 analysts surveyed by Seeking Alpha have an average price target of $24 per share. That represents a potential gain of 65% over today’s price. Even the lowest price target of $19 is still 31% over today’s price.
This is not that expensive for the stock. For example, analysts forecast that revenue will hit $1.46 billion by 2022. That represents a huge growth rate of at least 44% for next year. It also puts it on a forward multiple now of just 8 times 2022 forecast sales.
Assuming revenue continues to move very fast over the next two years, the $19 price target, or 28% higher gains, seems about right.
On the date of publication, Mark R. Hake did not hold any position (either directly or indirectly) 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.