One of the high-flyers in the market right now, SoFi Technologies (SOFI) is a company worth keeping on the radar. This online financial firm is one that has been soaring as of late.
Disruption of the traditional finance sector has come in waves. However, the past two years have provided more disruption than many investors expected. There’s a broad view that the pandemic may have accelerated technological innovation to an impressive degree. Many experts believe the past year alone has seen five years’ worth of innovation unfold.
That’s debatable. However, the business model of Social Finance, or SoFi, certainly furthers this thesis. The company seeks to provide financial services such as student loan refinancing, personal loans and auto loans completely online. Other insurance products are also being added.
As an online company, SoFi is able to keep overhead costs low, and theoretically, pass the savings onto consumers. This is a company with aggressive and competitive rates that’s after market share. Thus far, it appears the company has been making headway in this regard.
I’m currently bullish on SOFI stock, and think this is an aggressive growth stock worth taking a look at. Let’s see why that may be the case. (See SoFi stock charts on TipRanks)
Strong Results for SOFI
This past week, investors saw SoFi report its earnings. Much to the cheer of investors, this earnings beat was far better than expected by Wall Street.
In this market, even companies that beat earnings have subsequently sold off. Investors appear to be pricing in much higher expectations than Wall Street analysts right now. However, SoFi’s beat appears to have been large enough to warrant applause from the broader market.
The company brought in $277 million in revenue this past quarter, showing substantial growth on a year-over-year basis. However, what investors liked in particular about this figure was how it compared to analyst projections. The consensus estimate was $252 million. Accordingly, this revenue beat was more than 10% higher than what was expected.
Additionally, investors also seemed to like the company’s product growth. One of the bear theses on this stock is that there’s simply not enough verticals for growth right now. However, in the company’s recent report, it was noted that SoFi more than doubled its total product offering.
SoFi Acquires Galileo
Among the key factors leading to more bullish analyst sentiment around SOFI stock is a big move the online financial services company made last year.
In 2020, SoFi announced plans to acquire Galileo, a company offering the “financial plumbing” behind the financial services sector. This company focuses on technologies tackling account setup, direct deposit, funding, processing, authorization, payments functionality, and other key functions.
This deal has worked out spectacularly well. It’s estimated that this deal was a key driver of the company’s impressive growth of more than 200% on a year-over-year basis. Accordingly, from a strategic perspective, SoFi’s management team has gotten top marks from analysts and investors thus far.
Galileo itself brought approximately 79 million users to the SoFi platform. Additionally, it’s estimated that approximately $170 million in revenue and $70 million in profit were added to SoFi’s books as a result of this deal. Those are some meaningful numbers.
Thus, there’s the view that additional acquisitions could be on the horizon to juice SoFi’s growth potential. Whether or not these will materialize remains to be seen. However, this is certainly something investors are considering.
What Analysts Think About SoFi Stock
As per TipRanks’ analyst rating consensus, SoFi’s stock is a Strong Buy. Out of 6 analyst ratings, there are 5 Buy recommendations and 1 Hold recommendation.
The average SoFi price target is $25.58, indicating 12% upside potential.
Bottom Line
In the future, it’s possible that SOFI stock could encounter some turbulence. After all, this is a stock that has run quite high following this past earnings beat.
However, there’s also a lot to like about the growth trajectory of this company. If SoFi can continue to deliver on its promises, investors stand to gain.
There’s certainly reason to be skeptical of this company’s impressive growth. However, until SoFi proves otherwise, this is a growth stock investors with a little more stomach for volatility may want to consider as a long-term holding.
Disclosure: At the time of publication, Chris MacDonald did not have a position in any of the securities mentioned in this article.
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