Sell-off and Bank Charter Means Its the Ideal Time to Invest in SoFi Technologies InvestorPlace - Stock Market News, Stock Advice & Trading TipsSoFi stock is a cautious buy because the company is forecast to deliver strong revenue growth from a members platform...
By Faizan Farooque •
This story originally appeared on InvestorPlace
InvestorPlace - Stock Market News, Stock Advice & Trading Tips
SoFi (NASDAQ:SOFI) stock is arguably one of the best fintech companies in the world. However, SOFI stock has shed over 50% of its value in the past year. Moreover, the short interest in the stock has risen considerably over the past few weeks, which is indicative of more selling pressure ahead. Hence, the stock is likely to fall further, presenting an excellent opportunity to pick up the stock for the long haul.
With the recent tech sell-off, investors must stay patient. Naturally, with young growth stocks such as SoFi, there's likely to be plenty of volatility.
Moreover, the current sell-off can present a great opportunity to load up on the most promising growth stocks. SoFi, in particular, is likely to explode this year, especially after its bank charter approval. Therefore, with multiple growth catalysts ahead, it's best to invest in SOFI stock at such attractive levels.
The Bank Charter
SoFi became the first mobile-first fintech platform to become a bank. It had applied for a charter last year, and the approval of its application by the Office of the Comptroller of the Currency marks an important step in its evolution.
The bank charter allows the firm to ditch the middleman, offering lower interest rates. Moreover, it will enable the company to expand its competitive advantage in lending and financial services, which has been a key in its growth over the past couple of years. The firm's customer growth rates have risen incredibly during the pandemic, boasting a customer base of over 3 million.
The company's growth is linked to its financial services business, which has seen the highest customer adoption. Moreover, with the bank charter, SoFi's customer acquisition and monetization will significantly improve. Additionally, the charter will meaningfully expand the company's addressable market, lower borrowing costs, and open up cross-selling and upselling opportunities. The development is incredibly positive, but it will also lead to higher compliance costs.
Moreover, to expand its new business vertical, it will need to raise a hefty amount of capital to survive or issue new interest-bearing debt. Currently, it has over $500 million in cash and equivalents, and it also raised $1.2 billion in convertible loan notes last year. Hence, it's not in dire need to raise capital for its survival for now.
Strong Earnings Ahead
SoFi is set to report its fourth-quarter earnings in a few weeks, and all signs point to it maintaining the same momentum from the third quarter. During the third quarter, the firm saw rapid growth in its membership base by over 96% from the prior-year period. The company achieved four straight quarters where it posted 90% growth in its user base. Moreover, it also raised its guidance for the fourth quarter.
The company has seen blistering growth across virtually all its core metrics. Thanks to its growth across several metrics, its sales have quadrupled from 2019 levels. Moreover, its adjusted EBITDA has been positive for the past five quarters. Hence, with multiple growth drivers, the company is in for a strong showing for the foreseeable future.
On a side note, with the Super Bowl coming up, SoFi will have a chance to gain massive publicity. It owns naming rights worth over $25 million for the SoFi stadium, which will play host to multiple games in the event. The Super Bowl attracts over 96 million viewers and is the most popular sporting event in the United States.
The Bottom Line
SoFi is arguably one of the hottest fintech stocks with significant multi-bagger prospects. It recently attained the bank charter it had been chasing, which will separate it from the rest of the pack. Getting involved in the banking industry brings much more regulatory oversight and more work for SoFi.
But, there are benefits to this as well because they get a bigger share of every transaction. SoFi plans to offer higher-yielding accounts with competitive interest rates, and CEO Anthony Noto says that a national bank charter will allow them to lend at more favorable prices.
Its performance is outstanding, and it's likely to continue growing its top and bottom lines for the foreseeable future.
On the publication date, Faizan Farooque did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
Faizan Farooque is a contributing author for InvestorPlace.com and numerous other financial sites. Faizan has several years of experience in analyzing the stock market and was a former data journalist at S&P Global Market Intelligence. You can check out his analysis on InvestorPlace and TipRanks.
More From InvestorPlace
- Stock Prodigy Who Found NIO at $2… Says Buy THIS Now
- Man Who Called Black Monday: "Prepare Now."
- Get in Now on Tiny $3 "Forever Battery' Stock
- Interested in Crypto? Read This First...
The post Sell-off and Bank Charter Means Its the Ideal Time to Invest in SoFi Technologies appeared first on InvestorPlace.
