San Francisco-based SoFi Technologies (SOFI) operates a technology platform that offers financial services. I am bullish on the stock.
If today’s traditional big banks don’t feel threatened by SoFi Technologies, perhaps they ought to. Younger bankers, such as Millennials and Generation Z, deserve to have technology-enhanced ways to save and invest in the 2020s.
Old-fashioned banks aren’t always responsive to the demands of young bankers, and that’s going to hurt the bottom line of these out-of-touch financial institutions. Filling the gap is SoFi Technologies, a fintech startup with a bold vision to modernize banking as we know it.
Not everyone is going to like SoFi, but the company doesn’t seem to mind if there are haters and skeptics. The company is focused on the clients, not on people who have a vested interest in the status quo. If you’re on board with this audacious vision, then SOFI stock might be right for your portfolio.
Getting Results
Of course, having a bold vision isn’t enough for a startup business to survive. A company has to prove its ability to generate revenues. Plus, a company like SoFi can’t exist without its user base, and prospective investors have every right to ask whether the company is demonstrating user growth.
Thankfully, SoFi is hitting all the right marks. During 2021’s fourth quarter, SoFi’s total net revenue increased 67% to $285.6 million. For Fiscal 2021, SoFi’s total net revenue grew 74% to $984.87 million.
SoFi CEO Anthony Noto served up some more stunning stats for stubborn skeptics. In Q4 of 2021, SoFi’s adjusted net revenue of $280 million marked a quarterly record for the company, “up 54% year-over-year and up sequentially, even with the unexpected extension of the federal student loan payment moratorium in late December.”
Noto also noted that SoFi “exceeded $1 billion in annual adjusted net revenue for the first time” during 2021’s fourth quarter. Still not convinced? SoFi’s CEO also pointed out that SoFi “delivered fourth-quarter adjusted EBITDA of $5 million — our sixth consecutive positive quarter — resulting in positive full-year adjusted EBITDA of $30 million.”
Those fiscal figures out to get the SOFI stock bears questioning their positions. Even more importantly, these numbers should cause old-fashioned banking institutions a great deal of consternation. Sure, the bigger banks have more capital, but are they growing as fast as SoFi?
Truly, SOFI stock is more of a ground-floor opportunity than investing in a traditional bank. There’s less of a safety factor with SoFi than with an old-school financial institution, but the potential returns could be much greater if you’re able to tolerate the volatility and the growing pains.
What’s Happening with the Stock?
Speaking of volatility and growing pains, it has undoubtedly been painful for SoFi’s shareholders lately. After a sharp drawdown from the $23 level, SOFI stock is near 52-week lows in the $7 range.
Surely, it’s not a mere coincidence that the stock started to tumble in November of last year. That’s when the stock market began to enter into a correction. Technology-focused stocks got hit particularly hard, and financial stocks also came under negative price pressure.
SoFi is both a technology and a financial company, so it got a double-whammy from the broad-market correction. Some folks might be concerned that the stock market will continue to go down during 2022’s second quarter because the U.S. Federal Reserve is likely to raise interest rates.
If you’re a contrarian, though, then SOFI stock should look interesting to you right now. When a company is demonstrating powerful revenue growth yet, the share price is going down, that’s a divergence that should appeal to any “buy low, sell high” type of investor.
Say Hello to Crypto
Adding even more interest to SoFi is the company’s bold foray into the world of cryptocurrency. This is where some big banks might fall short, and SoFi can pull ahead of the pack.
Not long ago, SoFi introduced no-fee crypto purchases for direct deposit members. The ability to automate cryptocurrency investments for zero fees should attract Millennial and Generation Z bankers who want to make crypto trading easier and more cost-effective.
In addition, SoFi rolled out an online educational center “to explain the ins and outs of cryptocurrency to investors.” There’s no doubt about it: SoFi is getting aggressive in the crypto space, and as a result, the company could steal market share from out-of-touch big banks.
Wall Street’s Take
Turning to Wall Street, SOFI stock is a Moderate Buy based on seven Buy and five Hold ratings. The average SoFi Technologies price target is $14.86, implying 90.9% upside potential.
The Takeaway
As you can see, analysts are preparing for bigger and better things with SOFI stock. They’ve seen SoFi’s revenue growth, so the bullish argument is practically indisputable.
Yet, the SoFi share price is down. This shouldn’t be viewed as a problem, though, in my opinion. Really, it’s a chance to get in on the ground floor of a bold fintech business that’s making ambitious moves in the emerging cryptocurrency space.
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