What’s your best fintech pick for 2024? Look no further than SoFi Technologies (NASDAQ:SOFI) stock. SoFi Technologies will face its fair share of challenges this year, no doubt. Nevertheless, SoFi can grow and thrive in the coming quarters, especially if the Federal Reserve finally pivots to a series of interest-rate cuts.
There’s also the issue of student-loan debt, which we’ll address in a moment. It’s a complex landscape for SoFi Technologies, but the future looks bright for SoFi Technologies and the company’s patient investors.
SOFI Stock: Don’t Fret About Student-Loan Cancellations
There’s no denying that SoFi Technologies derives some of its revenue from refinancing student loans. It’s also true that the government is canceling some federal student-loan debt, including a recent discharge of $1.2 billion worth of student-loan debt.
Should this be a deal breaker for SOFI stock investors? Not at all. The government has been canceling federal student-loan debt for a while now, yet SoFi Technologies still managed to post its first-ever quarterly profit in 2023’s fourth quarter. Not only that, but SoFi’s adjusted net revenue grew 34% year over year to $594.245 million.
Besides, SoFi Technologies’ revenue comes not only from its lending business. Barron’s recently published a full report about how SoFi Technologies is “more than just loans.”
In other words, the company also derives significant revenue from its financial-services and technology businesses.
In addition, SoFi Technologies CEO Anthony Noto is evidently shifting his company away from reliance on lending. Noto clarified, “We are slowing down the lending business given our outlook for the economy, the macroeconomic environment.”
SoFi Technologies Could Benefit From Fed Policy
The Federal Reserve’s series of interest-rate hikes in 2022 and 2023 made it challenging for SoFi Technologies and other lenders to bring new borrowers on board.
So, while SoFi may veer away from its lending business, it would still be helpful for the company if the Federal Reserve finally starts cutting interest rates.
I wouldn’t dare to try to time the central bank’s first interest-rate cut. However, recent developments indicate that the rate cuts may happen sooner rather than later.
Specifically, the Federal Reserve’s “preferred inflation gauge,” the core Personal Consumption Expenditures index, only increased 2.8% YOY in January.
That, according to a Yahoo! Finance report, is the “slowest annual increase since a 2.2% increase in March 2021.”
That’s exactly what the Federal Reserve wants to see, I assume, before it commences a series of interest-rate cuts. It’s not a question of if the central bank will lower interest rates, but when this will happen.
If lending and borrowing conditions ease in 2024, this will create a more favorable environment for SoFi Technologies.
SOFI Stock: $10 Is the Next Stop on a Glorious Ride
I’ve been a cheerleader for SoFi Technologies for a while, and I’m eagerly waiting for the share price to break above $10. After that, the sky is the limit as retail traders will start chasing the stock.
You can get “ahead of the chase,” though. SoFi Technologies doesn’t depend too much on its lending business.
At the same time, SoFi’s lending business should benefit when the Federal Reserve loosens lending conditions. Therefore, it should only be a matter of time before SOFI stock reaches $10 and then heads toward higher price targets.
On the date of publication, David Moadel 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.
