- SoFi Technologies (SOFI) has a good business and strong growth.
- But SOFI stock has performed poorly, down over 60% year to date.
- If you’re in it for the long haul, this could be a good entry point.
SoFi Technologies (NASDAQ:SOFI) is a digital financial services company, meaning that almost all of its services are offered and performed over the internet. This is a highly disruptive and promising business — and highly competitive, although it is still in its early developmental stages.
SOFI stock was selling in the mid-$20’s in February 2021; the stock recently has been struggling to stay above $6 a share. Will the stock reverse course and take off on the upside? There are no guarantees, but I think there’s enough of a chance that long-term, risk-tolerant investors might consider this a good entry point.
| SOFI | SoFi Technologies | $6.39 |
SoFi Helps People Achieve Goals
SoFi Technologies operations include broad-based financial services, lending activities, and its technology platform.
The company, among other activities, offers student loan refinancing, medical/dental resident refinancing, parent PLUS refinancing, medical professional refinancing, law and MBA refinancing, private student loans, undergraduate student loans, graduate student loans, personal loans, parent student loans, and law and MBA loans.
As reported by Yahoo.com, SOFI states that their suite of services “helps people achieve financial independence to realize their ambitions. Our products for borrowing, saving, spending, investing and protecting give our over three and a half million members fast access to tools to get their money right.”
SOFI, in its financial services segment, makes it possible for its members to attempt to grow their money by investing and by allowing its members to borrow money, save money and use money in other ways. SOFI also states that “membership comes with the key essentials for getting ahead, including career advisors and connection to a thriving community of ambitious people.”
SOFI is popular with millennials, which could be a real asset going forward. As reported by talkmarkets.com, Adam Johnson said that “SoFi’s 2.5 million customers are predominantly Millennials and Gen Xers with strong credit, who consider themselves digitally native and seek complete control of their finances from a trusted mobile device.” And as they rely on SOFI for their products and services, that will create margin expansion and help its top line.
Johnson, portfolio manager for the Adviser Investments American Ingenuity strategy and editor of the Bullseye Brief, said that he favors quality in newer, small-cap companies because of the rise in interest rates. He looks for SoFi to earn revenues of $1.5 billion this year, which would be a 50% growth rate over last year, and estimated that SOFI would become profitable in 2022, or if not, in 2023.
Johnson also says that management is “highly pedigreed and appears to have the goodwill of Wall Street, a noted positive for a newly public company.” Good management can take a company a long way.
SOFI’s Past Earnings and Looking Ahead.
Michael Miller of Morningstar, after SoFi’s earnings report in March, said that “The largest driver behind the company’s growth was strong personal loan volume, with origination volume rising 168% from last year’s quarter to $1.65 billion.”
Miller wrote that there is strong momentum in the SOFI financial services segment. He wrote that “the number of SoFi Money and SoFi Invest accounts increased by 275,633 and 361,616 during the quarter to 1.44 million and 1.59 million, respectively. This growth represented a 123% increase.”
SoFi Investment accounts had a 200% increase year over year. User growth and new products grew so that financial services revenue was up 440% year over year.
Miller wrote that SOFI met its fourth-quarter 2021 revenue guidance with a 54% increase year over year. For those reasons, Morningstar was maintaining its “fair value” estimate for SOFI stock at $20 per share.
The 12 analysts surveyed by TipRanks give us an average price target of $14.86, with a high forecast of $22 and a low forecast of $10. The average price target is over 130% higher than its current price of $6.39. The site also rates it a moderate buy.
So, there are experts saying to buy SoFi stock. And the price is near a 52-week low.
Is SOFI Stock a Buy?
In this market environment, fraught with concerns regarding war, higher interest rates and possible economic slowdowns, it is difficult for a company with negative earnings, such as SOFI, to advance, even with good prospects.
However, SOFI stock could be bought here for investors with long horizons, who understand the risk and that it is difficult to calculate a downside on a negative-earnings company, could see this as an excellent long-term entry point. SOFI does have long-term appeal, and if one wants to own the stock and accepts the risk, the price could be a bargain.
On the date of publication, Max Isaacman 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.
