SoFi’s Future Is Bright, Just Not Right Now

  • SoFi (SOFI) stock was hit by rising interest rates.
  • Money costing money gave banks a financial advantage over fintechs built on stock.
  • The long term future is still bright, but it’s farther away than bulls think.
Person holding smartphone with website of US financial company Social Finance Inc (SoFi) on screen with logo Focus on center of phone display
Source: Wirestock Creators /

I was wrong about SoFi Technologies (NASDAQ:SOFI) stock.

I’m lucky. I only put in a few thousand dollars into the high-flying fintech stock. That money is mostly gone now.

The problem for SoFi, as for all fintechs, is that they depend on investors for cash. When money costs money, money seeking a return looks for sure things, like bonds and bank deposits. The cost of equity capital rises or, as in SoFi’s case, it may be unobtainable due to continuing losses. (Never mind the growth.)

On May 18, SoFi stock was fighting a losing battle to hold $7/share. It had a market cap of $5.6 billion on about $1 billion/year of revenue, on which it was continuing to lose money, $115 million or 14 cents/share for the March quarter. A slightly smaller loss is expected for the second quarter, 12 cents/share.

Ticker Company Price
SOFI SoFi Technologies $7.12

The Bull Case for SOFI Stock

Like many supposedly-smart people, I was taken in by the bull case of CEO Anthony Noto. He argued that SoFi could build a big bank and brokerage millennials would put in the palm of their hands.

That’s still a fair argument. But, with equity values down and interest rates rising, that iPhone or Android bank is as likely to identify as Bank of America (NYSE:BAC) as SoFi.

SoFi can sell to other banks. It has Galileo, which lets banks go online through simple Application Program Interfaces (APIs). It has a bank software firm in Technisys. But the potential returns on those pale in comparison to having so many small loans people will think they’re gambling with the shareholders’ money.

Speaking of which. SoFi’s earliest market niche came in refinancing student loans. Moratoriums on repayment, repeatedly extended during the pandemic, have cost SoFi dearly. It’s only when people stop focusing on that and start looking at SoFi’s rising deposits, most obtained since it bought Golden Pacific Bank , that it can rise again.

The Bear Case

Investors were not wrong to sell SoFi this year.

Their investments have been heavily diluted, by the Technisys acquisition and SoFi’s own habit of handing out stock to retain talent. As the stock price has fallen, the amount of stock required to get that talent goes up. While Technisys gets SoFi into the door at hundreds of banks, its aging software also represents technology debt, slowing overall growth.

SoFi isn’t the only fintech in the penalty box. Upstart (NASDAQ:UPST), which I also own, has had to slow its roll and let its stock fall. Affirm Holdings (NASDAQ:AFRM), which I wrote about recently, has also bottomed out. Analyzing individual stocks while assuming a stable economic environment got me, and others, into trouble.

But analysts have not yet given up on SoFi. At Tipranks, eight of 12 still want you to buy it and no one is saying sell. Piper Sandlin recently upgraded the stock, but its price target still has me in the red a year from now.

The Bottom Line

I haven’t sold my SoFi shares.

Brokers continue pounding the table for it. Analysts keep looking for opportunities to buy.

The argument for SoFi continues to make sense although, as they say, the market can be wrong longer than you can stay solvent. If you need to cash out, or you want to buy a cloud czar like Amazon (NASDAQ:AMZN) with certain profits, then pull the trigger. This is especially true if the loss looks good on your taxes.

But as I said my stake is small, and I bought for a tax-free retirement account. I may be 67, but I’m still working, and have enough cash to wait for the turn. That turn will come, just not right away.

On the date of publication, Dana Blankenhorn held long positions in SOFI, BAC, AMZN, and UPST. The opinions expressed in this article are those of the writer, subject to the Publishing Guidelines.

Dana Blankenhorn has been a financial and technology journalist since 1978. He is the author of Technology’s Big Bang: Yesterday, Today and Tomorrow with Moore’s Law, available at the Amazon Kindle store. Write him at, tweet him at @danablankenhorn, or subscribe to his Substack.

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