While the phrase “disruptor” may not be as widely used as it was during the height of pandemic-era boom in tech stocks, admittedly it’s still used way too often. However, this remains an apt descriptor for SoFi Technologies (NASDAQ:SOFI), no matter your view on SOFI stock.
Moreover, if you currently have a bearish view on the fintech firm’s shares, I would suggest taking another look. The company is best associated with its high exposure to the student loan refinancing business, but there’s a lot more to the story than that.
SoFi is positioning itself to become a big player in the world of finance, and not just in retail banking. Besides disrupting the big banks, this digital-first financial supermarket could give incumbent Wall Street banks a run for their money as well.
If your hesitation about this stock is largely about valuation, this may help to ease your concerns.
SOFI Stock: What Should Really Pique Your Interest
Ask those very and not-so familiar with SoFi Technologies about the company, and chances are they’ll respond with commentary related to SoFi’s legacy business: student loan refinancing. As I discussed in my last SoFi article, this “back to normal” moment could be more beneficial than currently-expected.
However, make no mistake, there’s more in the corner of SOFI stock than a rebound in student loan refinancing volumes. In fact, a stronger catalyst for shares moving forward is the firm’s continued move into areas of financial services long dominated by large, established institutions.
SoFi Technologies has only held a banking charter since 2022. In less than two years, SoFi’s retail banking unit now has nearly 2.7 million customers. While this may sound miniscule compared to the 68 million clients Bank of America (NYSE:BAC) has, double-digit customer growth points to SoFi eventually having an eight-digit banking client base of its own.
Not only that, like I mentioned above, SoFi is eyeing growth in the investment banking field. Just like in retail banking, SoFi’s moves in high finance could blossom into a material segment of its overall business. Here’s how.
Disrupting Main Street and Wall Street
By offering young, affluent banking customers greater convenience and tailored services than the “old school” competition, SoFi over time could become as ubiquitous as BAC, in terms of the number of checking, savings, and other financial accounts held at the firm.
Still, the increasingly likely rise of SoFi from early-stage fintech to financial services giant should not only give main street bankers pause. You may know that SoFi offers brokerage services through its platform. What you may not know is that it has moved into the IPO underwriting space as well.
After participating in the underwriting of several lower-profile special purpose acquisition company (or SPAC) IPOs, SoFi is about to be an underwriter for a major IPO. That would be the stock market debut of Instacart, expected to happen sometime this month. Sure, it’s not as if SoFi is the lead underwriter of this IPO.
However, if SoFi is successful with its democratization of the IPO space, through the sale of IPO shares to retail investors rather than institutional and high net worth investors, this fintech could join the legion of “bulge bracket” firms.
The underwriting of IPOs and other stock offerings could in time become a major revenue stream.
More Fuel for a Continued Comeback
SOFI’s prospects in retail and high finance point to strong growth ahead.
SoFi is on track to hit GAAP profitability by next quarter (ending Dec. 31, 2023). From there, further incremental gains in revenue could lead to an outsized jump in its bottom line.
By 2025, annual earnings could hit 25 cents per share. To the valuation-conscious, this may still seem insufficient to justify big upside for this stock (currently trading for around $8.50 per share).
Yet while shares may seem pricey compared to traditional bank stocks, don’t assume earnings growth will within two years screech to a halt.
By making inroads into both retail and investment banking, there is ample potential for earnings to grow in a way that will fuel a continued comeback for SOFI stock.
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.
