Last week it was reported that SoFi Technologies (SOFI) CEO Anthony Noto had spent nearly $100,000 to acquire 7,150 shares of SoFi stock. As the CEO of the company, it’s probably not too surprising to learn that Noto is a fan — but he isn’t the only one.
Rosenblatt analyst Sean Horgan rates SoFi shares a Buy along with a $30 price target. Investors could be pocketing gains of 111%, should Horgan’s forecast hit the mark over the next 12 months.
Horgan recently sat down with CEO Noto for a “fireside chat” during which Noto laid out his thoughts on where SoFi is today, and where this fintech stock is heading in the future.
“There is no challenger bank better positioned to secure a bank charter.”
This subhead from Horgan’s report pretty much summarizes his opinion on where SoFi is today. Currently, SoFi comprises three main businesses: lending, its largest, contributed 86% of the company’s revenues in 2020, but Horgan notes that this division should shrink to less than half the company’s business (43% of revenues) by 2025 as the company diversifies by expanding its other two divisions, technology (15% of revenues now, but moving towards 25%), and financial services (just 2% in 2020, but growing rapidly off its small base towards 32% of revenues by 2025).
Helping SoFi achieve this growth in financial services will be the company’s efforts to secure a bank charter, which it hopes to have in hand before the end of 2021. At the same time, SoFi is still working to gain mindshare in its customers such that they will begin to consider it their “primary bank account.” Key to making this happen, says Noto, is the company’s ability to get customers to direct-deposit their paychecks with SoFi.
“SOFI direct deposit is just scratching the surface” today, relative to where the bank hopes to eventually get, says Horton, but “if/when SOFI receives a bank license, there will be a step-function change in the differentiation it can add.”
At the same time, Horton observes that SoFi’s Galileo fintech infrastructure platform (i.e. the technology division) will complement obtaining the hypothetical bank charter, by making it easier for SoFi to partner with other companies to offer “sweep accounts, FDIC insurance warehouse facilities, etc.” Already, SoFi has helped double SoFi’s accounts to 79 million, but there’s room for even more growth.
And speaking of growth… let’s speak a bit about growth. From $621 million in revenue in 2020, Horton estimates that SoFi will grow about 58% this year to $979.7 million, then roughly triple that sum over the next three years until, by 2024, SoFi will be pulling down as much as $2.86 billion in annual revenue.
Earnings, on the other hand, will be a bit harder to come by. Horton notes that SoFi lost $5.53 per share last year. It should cut those losses by about 90% this year, losing only $0.55 per share. Next year, the company will approach breakeven — a $0.06 per share loss. By 2023, however, the analyst sees SoFi finally coming into its own, earning $0.27 per share, and then growing that 33% the following year.
If we turn to the Street in general, we can see that there are only two analyst reviews on record so far – but both are Buys. The average price target is $26.50, suggesting room for ~86% from the $14.21 trading price in the year ahead. (See SOFI stock analysis on TipRanks)
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Disclaimer: The opinions expressed in this article are solely those of the featured analyst. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.
