tiprankstipranks
Accelerating Growth Makes SoFi Technologies Very Attractive
Stock Analysis & Ideas

Accelerating Growth Makes SoFi Technologies Very Attractive

SoFi Technologies (SOFI) operates an all-in-one online personal finance platform. I am bullish on the stock. (See Analysts’ Top Stocks on TipRanks)

Few businesses in the financial space are more ambitious and potentially disruptive than SoFi.

It’s not just because SoFi wants to bring an end-to-end banking experience to your phone. It’s also because the company wants its customers to achieve financial independence.

Furthermore, SoFi is growing consistently according to some key measures. In addition, the company is now well-capitalized due to a smart move that will allow SoFi access to a cool $1 billion.

A Quick Look at SOFI Stock

For traders who like to “play the range,” SOFI stock is ideal.

Since the beginning of 2021, the stock has bounced like a pinball between $14 at the low end, and $24 at the high end.

Therefore, swing traders can attempt to book a nice profit by accumulating SOFI shares near $14, and then scaling out of their positions near $24.

“Rinse and repeat,” as the old saying goes.

Be patient, though, as SOFI stock ended October at around $20. That’s a little bit above the midpoint of the range.

So, let the trade come to you, rather than try to force it. As soon as SOFI stock gets close to the $14 buy zone, that could be an opportune time to make your move.

A Unique Challenger

Not only is SoFi a disruptive force in modern finance, but the company is also different from its competitors.

As Morgan Stanley’s Betsy Graseck put it, “SoFi is unique.”

How so? Graseck emphasizes that SoFi turns the traditional lending model on its head by making loans more affordable, not less.

“It is a challenger consumer finance company that is leading with lending; specifically refinancing a high-yield student loan into a lower rate,” Graseck explains.

This type of lending framework should appeal to young, open-minded borrowers, and should help to build SoFi’s business.

We can see evidence of this happening as SoFi is accelerating in more ways than one.

In terms of membership count, SoFi has eight consecutive quarters of year-over-year growth.

Furthermore, the company is on track to post multiple consecutive quarters of growth in overall products count and in the number of Galileo accounts.

The next financial results should be released soon, so it will be nice to see if SoFi can keep up this impressive pace of expansion.

Smart Way to Access Capital

Being well-capitalized is essential for businesses in growth mode, such as SoFi.

Some companies might be tempted to get quick access to capital simply by printing up more shares of their stock.

However, that could lead to share dilution, which may reduce the value of each share and cause consternation among stockholders.

Not long ago, SoFi took a different route. Rather than print up stock shares, the company enacted a private offering of $1.1 billion worth of convertible senior notes.

Yes, these senior notes are debt instruments, so it’s not just free money for SoFi.

However, the terms are quite favorable for SoFi. In particular, the interest rate on these senior notes is 0%.

When it comes to the terms of a loan, it doesn’t get any better than 0% interest (if you’re the borrower).

The notes will mature on October 15, 2026, unless the senior notes are repurchased, redeemed, or converted prior to that date.

According to SoFi’s estimate, the net proceeds from the offering will be around $1.078 billion.

That figure, however, could increase to approximately $1.176 billion if the initial purchasers fully exercise their option to purchase additional notes.

Wall Street’s Take

Turning to Wall Street, SOFI has a Strong Buy consensus rating, based on five Buys and one Hold assigned in the last three months. The average SoFi Technologies price target is $24.58, implying 14.9% upside potential.

The Takeaway

Graseck is 100% correct in asserting that SoFi is unique.

The company is also attractive to investors because it’s expanding in multiple ways.

Plus, SoFi will now have access to $1 billion or more in capital, with highly favorable loan terms.

These factors add up to a very strong bullish argument for SOFI stock now.

Disclosure: At the time of publication, David Moadel did not have a position in any of the securities mentioned in this article.

Disclaimer: The information contained in this article represents the views and opinion of the writer only, and not the views or opinion of Tipranks or its affiliates, and should be considered for informational purposes only. Tipranks makes no warranties about the completeness, accuracy or reliability of such information. Nothing in this article should be taken as a recommendation or solicitation to purchase or sell securities. Nothing in the article constitutes legal, professional, investment and/or financial advice and/or takes into account the specific needs and/or requirements of an individual, nor does any information in the article constitute a comprehensive or complete statement of the matters or subject discussed therein. Tipranks and its affiliates disclaim all liability or responsibility with respect to the content of the article, and any action taken upon the information in the article is at your own and sole risk. The link to this article does not constitute an endorsement or recommendation by Tipranks or its affiliates. Past performance is not indicative of future results, prices or performance.

Trending

Name
Price
Price Change
S&P 500
Dow Jones
Nasdaq 100
Bitcoin

Popular Articles