- SoFi (SOFI) stock will get its kudos in the long run.
- Currently it doesn’t fit the risk profile of preference.
- But fintech is a lasting trend, not a fad.
SoFi (NASDAQ:SOFI) stock has taken a few steps forward and many steps back. After an incredible rally out of the pandemic bottom, Wall Street has lost its appetite for a particular type of stock. That is, the Street is abandoning young, high growth public companies that are generally not profitable yet.
SOFI stock fits the bill, so it has struggled harshly for months. Despite this, my guess is that eventually investors will figure its worth out. The business is part of a strong wave of financial tech and consumer blossoming opportunities. The runway is long, so headwinds are now mere bumps along the road.
After three massive rallies in 2021, SOFI stock fell from grace like a brick. It is now more than 70% below the high watermark from early February 2021. Despite its business success, its stock lacks love among current investors. As a result, it has failed to sustain rallies too long to stop the slide.
| Ticker | Company | Current Price |
| SOFI | SoFi | $7.58 |
SoFi Stock Will Eventually Sustain Rallies
The problem isn’t with SOFI’s inability to rally; it has shown the propensity to rally. But several attempts have fizzled because of the group repellent effect. Basically if it fits the profile of a stock that Ark Invest likes, then Wall Street hates it now. Case in point, I bought SOFI $7.5 call options on March 14. The next day it embarked on a 35% rally, so my position doubled in value. Sadly, with April came a selloff that erased all of my gains and a tad extra.
Had I not booked some along the rise, I would have spun my wheels for nothing. This is the frustration that SOFI investors must be ready to endure for a few more weeks. Those who can do that will benefit from owning this stock for the long term. In my case, my intention was to hold it for the long term. And I have taken steps with my leftover position to do that. I still believe in its bullish thesis, especially if it’s part of a diverse portfolio.
The business opportunity in SoFi is attractive because it spans two lucrative areas of interest. First, the consumer sector has been on fire. The U.S. spending spree is feeding it from one end. Second is the financial technology opportunity, which is merely getting off the ground. Eventually, the world will almost exclusively transact digitally. This means that the opportunities for fintech companies are plentiful for decades.
Although it does not have the first mover advantage in either, those arenas are dynamic and full of potential. Old fintech dogs like Visa (NYSE:V), MasterCard (NYSE:MA) and American Express (NYSE:AXP) established the idea. By now, they are no longer the innovators, passing the torch to the likes of PayPal (NASDAQ:PYPL) and Block (NYSE:SQ). The next wave of innovation is likely to include SoFi and Affirm (NASDAQ:AFRM).
External Risks Are Headwinds
For the time being, investors are trying to settle their nerves over current risks. The Ukraine war and the enemy central banks are formidable threats. So traders are quick to hit the sell button, and stocks are likely to whipsaw a bit. The worries create a weak overall conviction status despite a strong economy. Therefore, retail investors are less likely to hang on to risky stocks.
Eventually, there will be enough gumption to step back into SoFi-like stocks. In the meantime, the opportunity window remains open to look far out past the clutter. I would consider SOFI stock an investment for the long term, but not all at once. Although I’m confident of the ultimate success of the business, I am iffy about the timing.
They don’t ring bells at perfect bottoms, so I should leave room to add more later with more clarity. I’m not one to chase headlines, but a global war would change the game for all profit and loss statements. It is imperative that I respect the risk that comes from such news. Investors who remain humble are less likely vulnerable to blind sides. Stocks don’t trade in a vacuum, they follow market trends.
According to Yahoo Finance, the experts don’t provide much clarity on SOFI’s opportunity. The average price target is now twice as much as the current price. One could perhaps draw the conclusion that they collectively believe it’s worth more than its current price.
On the date of publication, Nicolas Chahine held USDC, SOL and ETH. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
