$SOFI Best Fintech Stock To Invest In?
Considered to be of the top fintech companies, SoFi Technologies, Inc. (NASDAQ: SOFI) has been breaking headway in offering its suite of lending, financial services, and technology platform offerings to its more than 4 million members. While SOFI stock has been majorly impacted by the current inflationary environment in the market, the company continues to show stellar operational results in its earnings this year. With this in mind, SOFI stock is gaining momentum after posting its Q3 earnings which beat analyst estimates for the fifth consecutive quarter. While the stock has dropped significantly since posting its earnings, SOFI presents an opportunity to long-term investors to secure shares at a cheap price. Considering the company’s long-term potential in the fintech sector, SOFI stock could be one of the best stocks to hold onto for the long-term.
SOFI Fundamentals
Since its inception, SOFI has operated as a non-bank lender offering student loans, personal loans, and mortgage loans. To fund these loans, SOFI would borrow money from other financial institutions at a high interest rate. Looking to save these significant costs, SOFI gained its bank charter last February after acquiring Golden Pacific Bancorp, Inc. and its subsidiary Golden Pacific Bank which had $150 million in assets. Following this acquisition, SOFI renamed Golden Pacific Bank to SoFi Bank marking the company’s expansion in the banking sector.
Through this acquisition, SOFI was able to obtain a national bank charter and was approved by the OCC and the Federal Reserve. In this way, SOFI has been able to offer better features to its members including, checking and savings accounts, automated savings, and a user-friendly interface. In addition to allowing the company to attract more users, the bank charter allowed SOFI to fund the loans it offers to its members internally without incurring the costs of the high interest rates. At the same time, the charter made it possible for SOFI to collect the interest on payments itself which has positively impacted the company’s revenues in the previous quarters. In light of this, SOFI stock price has the potential to appreciate significantly as the company continues growing financially in the future.
Meanwhile, the banking license has provided SOFI with a competitive advantage over other fintech companies since getting such a license could be difficult for these companies. In this way, SOFI has emerged as a fintech leader in the market – making it one of the most promising fintech stocks to invest in for the long-term.
In other news, SOFI is well-positioned to capitalize on the current macro environment as the rapidly rising interest rates could allow the company to realize more revenues. Although these interest rate hikes could severely limit new loan originations, they continue to be resilient in the face of the growing interest rates. As a result, SOFI could be poised to further grow its revenues in the coming quarters given its more favorable rates to its members.
Despite the growth in personal loans, the mortgage market has been severely impacted by the inflationary cost pressures and growing interest rates. Since most people are deciding against buying new houses at the moment, SOFI is in a prime position to further grow financially in the current environment as the demand for its home renovation loans could increase significantly. Based on this, SOFI stock could be one of the best growth stocks to invest in at its current beaten down PPS given its future growth potential.
Although SOFI has a vast suite of financial services, student loans remain the bulk of the company’s loans. With this in mind, president Biden has recently extended the moratorium on student loan payments and interest until Jan 1, 2023. This moratorium has been in place since March 2020 and was set to resume in September 2020. However, the freeze has been constantly getting extended since then. With President Biden announcing that the most recent pause would be the final extension of the moratorium, SOFI could be on track to have an even more successful year in 2023.
Moreover, President Biden’s federal student loan forgiveness plan has been temporarily blocked by the US Courts of Appeals recently after 6 states appealed the decision. In this way, students with federal debt could be looking to refinance their loans at competitive rates in light of the growing inflation which SOFI already offers. With the appeal process yet to play out, more and more students could refinance their loans with SOFI which could have a major impact on the company’s financials in the coming quarters.
While SOFI’s financial services segment is its most recognized business, the company’s operations also includes a technology platform segment. These services are offered by SOFI’s subsidiary Galileo that provides businesses with the infrastructure to facilitate core client-facing and back-end capabilities. Since this segment has tremendous growth potential, SOFI acquired Technisys – a cloud-native, digital multi-product core banking platform to further advance this segment.
On that note, SOFI is looking to combine Technisys’s capabilities with Galileo’s technology stack to create the only vertically integrated banking technology stack. In this way, SOFI would be able to meet the growing needs of its partners and serve additional banks, fintechs, and non-financial brands looking to enter financial services. In light of this, SOFI appears to be delivering on its goal of providing best-of-breed products as a one-stop-shop financial services platform.
Additionally, this acquisition is set to have a major impact on SOFI’s revenues as the company expects Technisys to add $500 to $800 million through 2025. At the same time, SOFI expects the combination of Galileo and Technisys could allow it to save $75 to $80 million from 2023 to 2025 and $60 to $70 million annually thereafter. Meanwhile, SOFI believes that migrating off its current multiple third-party cores to the Technisys core could allow it offer faster and more efficient services to its members. Given that the company is constantly pursuing growth opportunities, SOFI stock has the potential to reach greater highs in the long-term.
SOFI Financials
In Q3, SOFI had its best quarter so far as it reported $424 million in revenues – representing a 56% YOY increase. This growth has been driven by strong performances from SOFI’s three business segments – lending, financial services, and technology platform. With that in mind, SOFI added 424 thousand new members in Q3 and also added 635 thousand new products – 61% and 69% YOY increases respectively.
Despite this growth, SOFI reported a net loss of $74.2 million compared to $30 million a year ago. On that note, the Q3 2021 net loss was boosted by $64.4 million from the change in fair value of warrant liabilities. By not accounting for this impact, SOFI’s net loss would have improved by $20.2 million YOY. In light of this impressive growth, SOFI raised its full year guidance for the third time this year as the company now expects to realize $1.51 – $1.52 billion in 2022. With the company constantly delivering substantial financial growth, SOFI stock forecast appears to be extremely bright for the future.
Technical Analysis
Currently trading at $5.12, SOFI has a support at 4.81 and shows resistances near 5.25, 6.04, and 6.61. After reporting its record Q3 earnings, SOFI stock soared by as much as 19% thanks to the company’s constant financial growth. As a result of this impressive spike, SOFI stock dropped 22% which could be mainly due to investors taking profits. Another reason that could have impacted the stock price is the FOMC meeting yesterday. While the 75 bps hike was expected, Fed Chair Jerome Powell emphasizing that it’s premature to discuss a pause in rate hikes sent the whole market tumbling.
With this in mind, SOFI broke through both of its MAs and a major support near $5.36 during its drop. Now that the stock is trading below its MAs, SOFI could further drop near its support which could be an attractive opportunity to secure shares of the company at such a low PPS. However, long-term investors could find a good entry in SOFI stock at the current PPS given its major potential in the long-run.
As the equity markets have been affected by the Fed’s attempts to curb the rising inflation rates, SOFI’s accumulation is trending downwards as less risky assets are more attractive at the moment for investors. Meanwhile, the MACD is bearish to the downside as a result of the profit taking occurring after the company’s record earnings. The RSI is holding at 39 – indicating that SOFI stock is slightly oversold. With this in mind, SOFI would require a high trading volume to move given its OS of 927.3 million and float of 786.2 million.
SOFI Forecast
With the company becoming an established financial institution with an impressive suite of products, SOFI stock has the potential to reach substantial highs in the long-term. Currently, SOFI is in its early stages as a bank since it received its bank charter earlier this year. For this reason, SOFI could be poised to report record financials in 2023 and beyond – especially since its members and products are continuing to grow at a significant rate.
While SOFI reported record financials in Q3, the company has the potential to report even better financials in 2023 as the student loan moratorium is set to expire in January 2023. Considering that SOFI had more than $2 billion student loan originations prior to the pandemic, the expiration of the moratorium could allow the company to witness substantial financial growth. Given the major potential of the company’s three business segments, SOFI stock could be one of the most profitable long-term holds considering its relatively low PPS.
SOFI Fundamentals
Since its inception, SOFI has operated as a non-bank lender offering student loans, personal loans, and mortgage loans. To fund these loans, SOFI would borrow money from other financial institutions at a high interest rate. Looking to save these significant costs, SOFI gained its bank charter last February after acquiring Golden Pacific Bancorp, Inc. and its subsidiary Golden Pacific Bank which had $150 million in assets. Following this acquisition, SOFI renamed Golden Pacific Bank to SoFi Bank marking the company’s expansion in the banking sector.
Through this acquisition, SOFI was able to obtain a national bank charter and was approved by the OCC and the Federal Reserve. In this way, SOFI has been able to offer better features to its members including, checking and savings accounts, automated savings, and a user-friendly interface. In addition to allowing the company to attract more users, the bank charter allowed SOFI to fund the loans it offers to its members internally without incurring the costs of the high interest rates. At the same time, the charter made it possible for SOFI to collect the interest on payments itself which has positively impacted the company’s revenues in the previous quarters. In light of this, SOFI stock price has the potential to appreciate significantly as the company continues growing financially in the future.
Meanwhile, the banking license has provided SOFI with a competitive advantage over other fintech companies since getting such a license could be difficult for these companies. In this way, SOFI has emerged as a fintech leader in the market – making it one of the most promising fintech stocks to invest in for the long-term.
In other news, SOFI is well-positioned to capitalize on the current macro environment as the rapidly rising interest rates could allow the company to realize more revenues. Although these interest rate hikes could severely limit new loan originations, they continue to be resilient in the face of the growing interest rates. As a result, SOFI could be poised to further grow its revenues in the coming quarters given its more favorable rates to its members.
Despite the growth in personal loans, the mortgage market has been severely impacted by the inflationary cost pressures and growing interest rates. Since most people are deciding against buying new houses at the moment, SOFI is in a prime position to further grow financially in the current environment as the demand for its home renovation loans could increase significantly. Based on this, SOFI stock could be one of the best growth stocks to invest in at its current beaten down PPS given its future growth potential.
Although SOFI has a vast suite of financial services, student loans remain the bulk of the company’s loans. With this in mind, president Biden has recently extended the moratorium on student loan payments and interest until Jan 1, 2023. This moratorium has been in place since March 2020 and was set to resume in September 2020. However, the freeze has been constantly getting extended since then. With President Biden announcing that the most recent pause would be the final extension of the moratorium, SOFI could be on track to have an even more successful year in 2023.
Moreover, President Biden’s federal student loan forgiveness plan has been temporarily blocked by the US Courts of Appeals recently after 6 states appealed the decision. In this way, students with federal debt could be looking to refinance their loans at competitive rates in light of the growing inflation which SOFI already offers. With the appeal process yet to play out, more and more students could refinance their loans with SOFI which could have a major impact on the company’s financials in the coming quarters.
While SOFI’s financial services segment is its most recognized business, the company’s operations also includes a technology platform segment. These services are offered by SOFI’s subsidiary Galileo that provides businesses with the infrastructure to facilitate core client-facing and back-end capabilities. Since this segment has tremendous growth potential, SOFI acquired Technisys – a cloud-native, digital multi-product core banking platform to further advance this segment.
On that note, SOFI is looking to combine Technisys’s capabilities with Galileo’s technology stack to create the only vertically integrated banking technology stack. In this way, SOFI would be able to meet the growing needs of its partners and serve additional banks, fintechs, and non-financial brands looking to enter financial services. In light of this, SOFI appears to be delivering on its goal of providing best-of-breed products as a one-stop-shop financial services platform.
Additionally, this acquisition is set to have a major impact on SOFI’s revenues as the company expects Technisys to add $500 to $800 million through 2025. At the same time, SOFI expects the combination of Galileo and Technisys could allow it to save $75 to $80 million from 2023 to 2025 and $60 to $70 million annually thereafter. Meanwhile, SOFI believes that migrating off its current multiple third-party cores to the Technisys core could allow it offer faster and more efficient services to its members. Given that the company is constantly pursuing growth opportunities, SOFI stock has the potential to reach greater highs in the long-term.
SOFI Financials
In Q3, SOFI had its best quarter so far as it reported $424 million in revenues – representing a 56% YOY increase. This growth has been driven by strong performances from SOFI’s three business segments – lending, financial services, and technology platform. With that in mind, SOFI added 424 thousand new members in Q3 and also added 635 thousand new products – 61% and 69% YOY increases respectively.
Despite this growth, SOFI reported a net loss of $74.2 million compared to $30 million a year ago. On that note, the Q3 2021 net loss was boosted by $64.4 million from the change in fair value of warrant liabilities. By not accounting for this impact, SOFI’s net loss would have improved by $20.2 million YOY. In light of this impressive growth, SOFI raised its full year guidance for the third time this year as the company now expects to realize $1.51 – $1.52 billion in 2022. With the company constantly delivering substantial financial growth, SOFI stock forecast appears to be extremely bright for the future.
Technical Analysis
Currently trading at $5.12, SOFI has a support at 4.81 and shows resistances near 5.25, 6.04, and 6.61. After reporting its record Q3 earnings, SOFI stock soared by as much as 19% thanks to the company’s constant financial growth. As a result of this impressive spike, SOFI stock dropped 22% which could be mainly due to investors taking profits. Another reason that could have impacted the stock price is the FOMC meeting yesterday. While the 75 bps hike was expected, Fed Chair Jerome Powell emphasizing that it’s premature to discuss a pause in rate hikes sent the whole market tumbling.
With this in mind, SOFI broke through both of its MAs and a major support near $5.36 during its drop. Now that the stock is trading below its MAs, SOFI could further drop near its support which could be an attractive opportunity to secure shares of the company at such a low PPS. However, long-term investors could find a good entry in SOFI stock at the current PPS given its major potential in the long-run.
As the equity markets have been affected by the Fed’s attempts to curb the rising inflation rates, SOFI’s accumulation is trending downwards as less risky assets are more attractive at the moment for investors. Meanwhile, the MACD is bearish to the downside as a result of the profit taking occurring after the company’s record earnings. The RSI is holding at 39 – indicating that SOFI stock is slightly oversold. With this in mind, SOFI would require a high trading volume to move given its OS of 927.3 million and float of 786.2 million.
SOFI Forecast
With the company becoming an established financial institution with an impressive suite of products, SOFI stock has the potential to reach substantial highs in the long-term. Currently, SOFI is in its early stages as a bank since it received its bank charter earlier this year. For this reason, SOFI could be poised to report record financials in 2023 and beyond – especially since its members and products are continuing to grow at a significant rate.
While SOFI reported record financials in Q3, the company has the potential to report even better financials in 2023 as the student loan moratorium is set to expire in January 2023. Considering that SOFI had more than $2 billion student loan originations prior to the pandemic, the expiration of the moratorium could allow the company to witness substantial financial growth. Given the major potential of the company’s three business segments, SOFI stock could be one of the most profitable long-term holds considering its relatively low PPS.