Based in San Francisco, Calif., neo-banking leader SoFi Technologies (NASDAQ:SOFI) could be described as a company in transition. What SOFI stock traders need to know is that some recent developments are likely to change the company’s business model.
For years, SoFi was mostly known as an all-in-one personal-finance app. It has definitely caught on quickly with consumers, as the company added 377,000 new members during 2021’s third quarter.
Not only that, but SoFi recorded $277 million in adjusted net revenue during that quarter, thereby marking 28% year-over-year growth. So clearly, the company is on the right track, financially speaking.
Given those stats, it’s surprising that traders have dumped their SOFI stock shares. In a moment, we’ll assess the technical damage, as well as the dip-buying potential for enterprising investors.
A Closer Look at SOFI Stock
It’s not every day that market technicians encounter a stock with clearly defined support and resistance levels. When this happens, it makes trading much easier and usually, more profitable.
Going back to where it all started, SOFI stock started trading on the Nasdaq on June 1, 2021. This was the result of a special purpose acquisition company (SPAC) merger with blank-check company Social Capital Hedosophia Holdings V.
Prior to that day, the stock traded as IPOE stock. Even before the ticker-symbol change, the stock had already established a resistance level of $24 in February 2021 and a support level of $14 in May of that year.
Then, SOFI stock hit $24 again in June, and then $14 in August, followed by $24 in November. Predictably, the stock came right back to $14 in December.
How long will it take for the share price to return to $24 again? It’s difficult to tell, so don’t try to time it — just start accumulating at a low price if you like the company.
A Bona Fide Bank
All along, SoFi hasn’t tried to hide its direct appeal to younger bankers. Through its app, the company made it convenient to get access to student loans, personal loans, credit cards and mortgages.
Millennials, Zoomers and other bankers could use the app to save and invest, and thereby grow their wealth. Yet, despite its range of useful financial services, SoFi couldn’t officially call itself a bank in the U.S.
That’s changing now, though. Reportedly, the Office of the Comptroller of the Currency and the U.S. Federal Reserve have finally approved SoFi’s application to operate a bank subsidiary, known as SoFi Bank.
Not to overload you with puns, but this really is an achievement which SoFi’s investors can bank on. Mizuho Securities analyst Dan Dolev emphasized, “While having a bank charter license helps improve credibility and trust, it first and foremost should help lower SoFi’s cost of capital.”
A Golden Opportunity
How much will the bank charter benefit SoFi, dollar-wise? Dolev’s ready with an answer to that query: “We estimate the benefit could potentially be $200 million to $300 million of incremental adjusted EBITDA, mainly due to lower funding costs.”
In other words, becoming a real-deal national bank will enhance SoFi’s credibility while probably also bolstering the company’s bottom line.
If that’s not enough good news for you, then listen to this. Just recently, SoFi revealed that it has completed its acquisition of Golden Pacific Bancorp.
That’s a Sacramento, California-based community bank with roughly $150 million in assets. Granted, it’s not a financial giant, but buying out Golden Pacific Bancorp should provide an additional revenue stream for SoFi.
Without a doubt, Golden Pacific Bancorp’s customers should notice a difference — and that’s not a bad thing at all.
“Through this acquisition, Golden Pacific Bank members can expect an elevated digital and more robust mobile banking experience to serve local businesses and individual customers,” SoFi CEO Anthony Noto explained.
The Bottom Line on SOFI Stock
In light of the recently acquired banking charter and the Golden Pacific buyout, it’s hard to justify SOFI stock’s low price.
Yet, investors don’t have to worry about justifications. As long as the stock is trading near its established support level, traders can take a position in SoFi with confidence.
Still, patience will be required as the stock won’t likely get to $24 today or tomorrow. In time, however, a small stake could grow exponentially as Wall Street finally comes to appreciate SoFi’s arrival as a legitimate financial entity.
On the date of publication, David Moadel 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.
David Moadel has provided compelling content – and crossed the occasional line — on behalf of Crush the Street, Market Realist, TalkMarkets, Finom Group, Benzinga, and (of course) InvestorPlace.com. He also serves as the chief analyst and market researcher for Portfolio Wealth Global and hosts the popular financial YouTube channel Looking at the Markets.
