Last summer, with the resolution of the “student loan repayment saga,” shares in SoFi Technologies (NASDAQ:SOFI) stock spiked above $10 but since has slid but has since slid below $7. Jitters about spiking interest rates have played a role as has waning enthusiasm for the student loan catalyst. Unfortunately, the market hasn’t focused enough on other potential growth areas.
However, this could change as soon as next week. That’s not to say you need to grab a position in this “future of finance” stock ASAP, but if you’ve been mulling whether to add this stock to your portfolio, feel free to do so.
SOFI Stock: Still More Than Just Student Loan Refinancing
SoFi Technologies made its bones in the student loan refinancing space. There has been a great expectation that the end of the aforementioned “saga,” which means a resumption of student loan repayments, would usher in a comeback for this largely dormant business unit.
While some analysts have talked positively about this catalyst, others, like Truist’s Andrew Jeffrey (who is though, by the way, bullish on SOFI stock), believe it will have less of a positive impact on future results than initially expected.
Although not for certain, the market may be taking a similar view. Coupled with rising uncertainty caused by the latest macroeconomic developments, the market’s current “on the fence” view regarding shares is not that surprising.
That said, it should be noted that SoFi has come a long way from being just a student loan refinancing firm. Today both a fintech and a neo-bank, a more apt descriptor for may be digital-first financial supermarket. Investors seem to forget this right now, yet pretty soon, they could receive a big reminder.
What am I talking about? SoFi’s upcoming quarterly earnings release, pre-market on Oct. 30. The takeaways from this event could help shares get back on track.
The Start of Renewed Bullishness
At next week’s earnings release, many things could happen that may help shift the market’s view on SOFI stock back towards bullish. Yes, tech stocks have been hammered this earnings season. Going into earnings, the sell-side has already revised down its earnings forecast for Q3 2023.
Even so, the market could still overlook a bottom line that merely meets or slightly-misses expectations. Still considered an early stage company, the market does not expect SoFi Technologies to have hit GAAP profitability during Q3.
What may be of greater focus is whether a high level of revenue and membership growth has continued.
In addition, while maybe not expecting positive earnings for the preceding quarter, investors will react favorably if management (as expected) reiterates that GAAP profitability is hit during the current quarter.
Now, I’m not saying a well-received earnings report will send SOFI soaring “to the moon” immediately. It may, however, help mark the start of renewed bullishness.
After that, the reporting of profits for Q4, plus other positive developments, may help the stock climb back above $10 per share. Better yet, beyond just re-hitting $10 per share, a move to substantially higher is within the realm of possibility.
Long-Term Investors: Feel Free to Buy
I wouldn’t underestimate SoFi’s potential to become a major financial institution over the next decade. As I’ve pointed out previously, this firm’s focus on affluent, tech-savvy consumers may enable it to go from America’s 176th largest bank by deposits, to one whose size is on par with the country’s largest banks.
With increases in membership, SoFi may be poised to experience exponential growth in profitability. As one analyst (Mizuho’s Dan Dolev) recently argued, each $100 million increase in GAAP profitability can increase SoFi’s lending capacity by a figure up to eight times that amount.
With this, just like I put it above, investors with patience should feel free to buy. While the upcoming earnings release may or may not spark a major comeback for shares, much is in play to make SOFI stock a long-term winner.
SOFI stock earns a B rating in Portfolio Grader.
On the date of publication, neither Louis Navellier nor the InvestorPlace Research Staff member primarily responsible for this article held (either directly or indirectly) any positions in the securities mentioned in this article.
