SoFi Technologies (NASDAQ:SOFI) stock is worth another look.
The banking sector saw some scary days in the first half of 2023. However, fintech companies such as SoFi emerged resilient, and have gained favor among growth investors.
Some of that has to do with the company’s focus on student loan refinancing, and some of that has to do with SoFi’s newfound prospects as a full financial hub.
As more student loan borrowers look to refinance their debts at more favorable rates, SoFi stock should take off.
Of course, some big bank analysts continue to express caution around this name. That said, I think SoFi’s mission to revolutionize traditional banking may not be so far-fetched after all.
Here’s why I think now is the time to buy SOFI stock, before the growth starts rolling in via the resumption of student loan payments.
SoFi is Diversified
As mentioned, student loan refinancing applications are going to drive the vast majority of SoFi’s business, and it should. The company is among the leaders in this space, providing aggressive loans at some of the most favorable rates.
However, SoFi has also beefed up its status as a resilient, defensive fintech offering. The company has diversified its lending portfolio beyond student lending, thriving with a popular digital platform and bank acquisition.
Amid pandemic-induced student loan setbacks, other sectors, like personal loans, experienced notable year-over-year growth.
The company’s adjusted Q1 revenue surged by 43% year-over-year to $472 million, backed by a 37% deposit boost in financial services.
The diversified model offers protection against market fluctuations, particularly crucial in the finance sector where economic shifts affect services variably.
Future Expansion Plans
Starting as a student loan-centric entity, SoFi became a multifaceted financial services app, attracting users through its user-friendly platform and expanding customer base.
Despite the student loan moratorium challenge, its diversification softened the blow, reflected in a robust 43% Q1 revenue rise. SoFi’s persistent innovation and broader financial services appeal to contribute to its ongoing customer traction.
SoFi is enhancing financials, emphasizing loss reduction. Indeed, SoFi saw a notable improvement in Q1, trimming its net loss from $110 million to $34 million year-over-year.
Positive Adjusted EBITDA growth continued, rising from $9 million to $76 million. Additionally, SoFi’s CFO envisions net income positivity by Q4 2023, hinting at potential future profitability.
SoFi Is Beneficial During Soothing Inflation
Investors aligning with Adelson may favor stable big-bank stocks due to lower volatility, unlike the fast-moving SOFI stock, which is unsuitable for all portfolios.
SoFi enjoys an external boost with inflation easing, evident in reduced Consumer Price Index and core PCE growth rates.
Soothing inflation is positive for SoFi Technologies and stakeholders, boosting SOFI stock by 5% on July 28 after PCE growth news. Reduced inflation empowers consumers for mortgage loans, travel, and investments—areas where SoFi plays a significant role.
What Now?
SoFi’s revenue diversification enhances its appeal as a long-term investment, setting it apart from other student lender stocks. The end of the student loan moratorium could add to its gains.
SoFi has skillfully broadened its offerings beyond student loans. This includes entering personal lending and acquiring Golden Pacific Bancorp to become a bank, bolstering net interest income.
Its technology strength positions it favorably in the expanding banking-as-a-service domain.
While predicting inflation’s future is uncertain, SoFi Technologies’ potential shines if inflation remains controlled. Unlike traditional banks, assess SoFi based on its distinct strengths.
SOFI stock merits a “B+” grade, suited for specific investors aligned with its innovative vision. Potential strong returns in 2023’s second half await those embracing SoFi’s unique disruption.
On the date of publication, Chris MacDonald 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.
