Headquartered in California, SoFi Technologies (SOFI) provides a variety of digitally based financial services. I am bullish on the stock.
When beaten-down stocks recover, sometimes the rebound is shockingly swift. This is especially true when the market has oversold a perfectly good company.
Customers have known SoFi as a one-stop app for practically everything you might want to do with personal finance: spending, saving, investing, and so on. SoFi sought to beat traditional payment and credit card companies at their own game with modern technology, while appealing to the young Millennial and Zoomer generations.
This sounds like a savvy business model, but judging by the SOFI stock price action, some investors haven’t stayed in the trade. Does this mean that SoFi is a failing business, though?
In actuality, SoFi is doing just fine and there’s data to prove it. Sure, SoFi is undergoing a crucial transition now, but it’s a change that should benefit the company and its many stakeholders.
Down, but Coming Back
On May 13, 2022, SOFI stock rocketed up 19% in a single day. Clearly, a powerful comeback was afoot. On the other hand, the stock was still far below its 52-week high of nearly $25.
This is a picture-perfect example of when technical experts buy stocks. They wait until the stock is near its 52-week low, but then the buyers step in on high volume and the stock starts to curl back up. When that happens, you can buy some shares and set a price target at the previous high mark.
Could SOFI stock get back to $25 someday? That’s a lofty objective, but it’s not impossible. SoFi is undergoing an important transition, and major changes can sometimes scare investors away. However, this particular change is a positive one.
Here’s the scoop. In March, SoFi agreed to buy out a small California-based community bank. Now, you might wonder: What’s unusual about this transaction? The answer is that it represented the beginning of SoFi’s transition from being just another fintech company, to becoming a full-fledged neo-bank.
Not long after SoFi agreed to acquire the aforementioned community bank, the U.S. Federal Reserve and the Office of the Comptroller of the Currency approved SoFi’s application to operate a bank subsidiary, which would be called SoFi Bank.
Consequently, SoFi finally had a banking charter and could legitimately call itself a bona fide neo-bank. This means that SoFi’s customers should get access to more competitive interest rates for loans, high-yielding interest in their savings and checking accounts, and other potential benefits.
Leaked Early, but Still Positive
Oddly enough, SoFi getting its banking charter wasn’t enough to convince the investing community to stop selling SOFI stock. Sometimes, financial market traders are just very hard to please.
On top of that, SoFi earned the highest overall customer ratings in a national survey conducted by IBD and TechnoMetrica. Apparently, SoFi’s app was rated as the “Best In Fintech,” beating out other popular financial apps like Webull and Plaid.
Yet, this honor wasn’t enough to set SOFI stock back on the comeback trail. However, a major earnings release seems to have brought some investors into the long side of the trade.
Before delving into the data, we should take note of a very unusual incident. It’s been reported that SoFi’s second-quarter 2022 earnings results were leaked/published ahead of schedule. In hindsight, we can see that this wouldn’t have a profound impact on the company or the stock, but it seemed like a big deal at the time.
When SoFi’s official Q2 2022 earnings press release was published, there were plenty of positive data points to dig into. After analyzing the numbers, it won’t be difficult to figure out why investors pushed SOFI stock higher.
First of all, SoFi generated $330.3 million in total GAAP net revenue during the quarter. This represents an eye-opening 69% increase on a year-over-year basis. Second, the company narrowed its GAAP earnings loss per share from $1.61 in the year-earlier quarter, to just 14 cents in 2022’s second quarter. At this rate, SoFi could conceivably turn profitable in the near future.
Along with all of that, SoFi CEO Anthony Noto had a handful of impressive second-quarter membership-related stats to share. “We added more than 408,000 new members, our third-highest member growth quarter, ending with nearly 3.9 million total members, up 70% year-over-year,” Noto noted.
Wall Street’s Take
According to TipRanks’ analyst rating consensus, SOFI is a Moderate Buy, based on seven Buy and five Hold ratings. The average SoFi Technologies price target is $12.04, implying 78.4% upside potential.
Takeaway
It might be bothersome to some folks that SoFi’s quarterly results were reportedly released/leaked early. The more important thing to observe, though, is that SoFi’s financial and membership-related results were generally positive.
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