SoFi Technologies (NASDAQ:SOFI) is a fintech growth stock that’s had a pretty dismal showing in recent years. Despite its recent tick higher over the past month, SOFI stock is still down roughly 75% from its 2021 peak, suggesting that many long-term growth investors may have lost faith in this once high-flying name.
The company’s status as a top fintech company was certainly bullish in 2021, when banking activity peaked as interest rates remained ultra-low. However, in this era of tighter monetary policy, the mood on Wall Street has clearly shifted toward SoFi and its fintech peers.
That said, recent results have been strong. In Q1 2024, SoFi reported adjusted net revenue of $581 million, a 26% year-over-year increase, and consistent growth over the past 12 quarters. Adjusted EBITDA also rose 91% to $144 million, with analysts predicting a break-even year and an EPS of two cents, exceeding estimates.
Here’s why SOFI stock may be a fintech company that’s worth buying right now.
Strong Digital Bank
SoFi primarily operated as a digital bank while offering fintech services through Galileo and Technysis. Starting with student loans, the company has since expanded into a diversified banking platform via its app, a model which does not require physical branches. This approach facilitates low-cost cross-selling on the company’s platform.
SoFi has also reported impressive membership improvement, with total users growing from 1 million to around 8.1 million in the span of four years. The platform also received a 4.8-star rating on App Store with 350,000 reviews, showing strong user satisfaction across the board.
Investors also received encouraging news as SoFi’s book value per share began rising significantly since late 2023. This increase, coupled with a declining share price, made SoFi less expensive compared to established banks. It’s reasonable for SoFi, a less-proven bank, to trade at a discount. As its book value continues to grow, investors could see strong returns.
Despite past challenges, SoFi’s improved valuation and rising book value position it for better future stock performance.
Why Investors May Want to Look At SoFi
Despite losses, SoFi aggressively invested in customer growth, adding over 600,000 new members in Q1, a 44% year-over-year increase. Adjusted net revenue rose 26% to $581 million, with 2024 projections for over 75% growth in financial services revenue. Transitioning from student loans to a diversified financial services model, SoFi’s primary income still comes from lending.
Analysts see significant growth potential, particularly in expanding its credit card business and technology platform. Moreover, CEO Anthony Noto added more confidence as he purchased more shares.
SoFi is also strengthening its balance sheet, with its book value of $608 million continuing to improve. This solid financial position supports growth initiatives and resilience against economic fluctuations. Continuous top-line growth and improving profitability highlight SoFi’s scalable business model, making it a top hidden gem in the market.
Green Light for SOFI
Is SoFi a buy? It depends on individual preferences and risk tolerance. For investors seeking quick gains, the future is uncertain. For investors not as concerned with risk, this is a stock that may certainly ramp up a portfolio’s return profile, particularly over longer periods of time.
It’s my view that investors that are bullish on the fintech space may certainly want to consider SoFi. This is a company with strong long-term growth potential in the student loans space (private refinancing activity should pick up when interest rates drop), with many consumers now looking for digital banking options relative to the old guard. If this trend continues, there’s a lot to like about how SOFI stock is positioned right now.
On the date of publication, Chris MacDonald did not hold (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.
On the date of publication, the responsible editor did not have (either directly or indirectly) and positions in the securities mentioned in this article.
