Why SOFI Stock’s Recent Slump Is Your Growth Opportunity


  • SoFi Technologies (SOFI) stock has underperformed this year, losing more than 25% of its value since the start of 2024.
  • That said, the company is starting to see a shift in Wall Street sentiment toward a more bullish stance on the fintech name.
  • As student loan refinancing activity picks up, SoFi could become the compelling opportunity growth investors are looking for right now.
SoFi stock - Why SOFI Stock’s Recent Slump Is Your Growth Opportunity

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This year started off very well for fintech company SoFi stock (NASDAQ:SOFI). In January, the company released its Q4 2023 earnings report with GAAP profit seen for the first time. The company’s user base also increased as the platform offered increased banking services. SoFi stock aims to add more members this year, about 2.3 million, with a younger demographic targeted. Reporting a 34% revenue increase, SoFi anticipates a GAAP net income of $10 to $20 million in Q1. 

That all sounds great. But SOFI stock has certainly not felt the love in recent months, down more than 25% since the start of the year. Here’s why I think this recent dip could be one worth buying for long-term growth-at-a-reasonable-price investors.

Price Target from Deutsche Bank

Considering recent capital structure changes, Deutsche Bank maintained a hold rating on SoFi Technologies with a stock price target of $12.00 maintained. This target was driven by a convertible debt issuance aimed at reducing effective interest rates, albeit with a slight rise in outstanding shares. 

Despite potential shareholder dilution concerns, management assured investors that the company’s earnings per share would not be impacted by this move, due to savings on interest and preferred dividends.

Deutsche Bank noted the market’s predictable reaction to SoFi’s recent actions, considering its history of volatility and large retail investor base. Despite this, the bank’s perspective on SoFi remains steady, labeling it a “show-me story.” 

I think that’s the correct way to view SoFi right now. The company emphasizes the importance of consistent growth in SoFi’s non-lending segments and scaling benefits to justify its valuation akin to a FinTech firm. This analyst commentary also underscores the significance of SoFi’s performance beyond lending in evaluating its long-term value and investment appeal.

Success Here and There

The success of SoFi was least anticipated as it faced hurdles in past years. However, since 2011, SoFi stock has emerged post-recession and amassed over 7.5 million users. With potential comparable to leading banks, SoFi’s growth prospects are promising.

In Q4 2023, customers typically used 1.5 products, a historically increased trend. SoFi’s attractive savings rate often leads to expanded services like brokerage accounts or mortgages, boosting long-term revenue. Previously operating at a loss, SoFi reported positive GAAP net income last quarter, with management expecting rapid bottom-line growth. Investors are optimistic for the fintech company especially now that it’s seeing some revenue. The stock remains reasonably priced despite of recent rise.

Long-Term Potential

SoFi has gained attention amid speculation of potential interest rate cuts by the Federal Reserve. The company’s emphasis on prime borrowers reduces credit risk and offers lucrative cross-selling prospects for its various products, as noted by Needham.

SoFi Technologies obtained a full banking license through the acquisition of Golden Pacific in 2022, offering stable funding. Analysts view SoFi as a leader in digital lending and neobanking, mainly focusing on prime consumers and enhanced unit economics.

I think that over the long-term, SoFi stands a chance at becoming a real competitor in what should be a high-growth fintech landscape. When we do see rate cuts and the lending environment improve, so too should SOFI stock. The thing is, when things get better, SOFI stock will likely already reflect this sentiment in its stock price. So, now may be the best time to start building a position, at least in my view.

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.

Chris MacDonald’s love for investing led him to pursue an MBA in Finance and take on a number of management roles in corporate finance and venture capital over the past 15 years. His experience as a financial analyst in the past, coupled with his fervor for finding undervalued growth opportunities, contribute to his conservative, long-term investing perspective.

Article printed from InvestorPlace Media, https://investorplace.com/2024/04/why-sofi-stocks-recent-slump-is-your-growth-opportunity/.

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