Just when it looked like SoFi Technologies (NASDAQ:SOFI) was going to have a positive week, the bottom fell out. SOFI stock fell 9% on Apr. 29. But the financial technology (fintech) company has been swimming against the tide of bearish market sentiment for some time. For example, the stock is down almost 61% in 2022. It is down 75% from its 52-week high. And it is even down from its initial closing price of $10.41 on Dec. 4, 2020. But that’s just math. It is the underlying trends that should concern investors more. And until those trends change, there is little reason for investors to get involved.
It wasn’t always this bleak for SOFI stock. As recently as November, the stock was trading for around $23 per share. The pandemic accelerated the growth of fintech companies. And that combination of companies that offered financial services and technology was a compelling investment thesis.
However, Bloomberg recently reported that in April, two of the worst performing market sectors were financial services, down 7.2% and technology, down 6.9%. Not surprisingly, investors were actively rotating their holdings away from these two sectors. Since SoFi Technologies has a foot in both sectors, it is not a shock that SOFI stock was down 23.5% for the month.
Another factor working against SOFI stock is the slowdown in college admissions. In January 2022, the National Student Clearinghouse Research Center reported that college admissions were down by almost one million since the onset of the pandemic. However, that appears to be only accelerating a decline that adds up to nearly three million in the last decade. And as The Atlantic reports, this decline is particularly acute among college-aged males. Let’s not forget that interest rates will be on the rise, as well. That won’t make student loans any more attractive.
Student loans make up a good bit of SoFi’s available market. And once SoFi captures a customer with a student loan, it’s easier to get them deeper into the company’s ecosystem. While not necessarily unique, SoFi has a way of connecting with a customer base that is comfortable with, and prefers, digital banking.
I’ve generally been bullish on SoFi Technologies. And the company’s ability to offer more traditional banking products may help provide new revenue streams that investors are not fully accounting for. I don’t expect to learn more about that when the company reports earnings in May. Therefore, unless investor sentiment changes, SOFI stock is only for the most risk-tolerant investors.
On the date of publication, Chris Markoch 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.