Fintech growth stocks have thrived, offering cost-effective and convenient solutions through digital platforms. SoFi Technologies (NASDAQ:SOFI) stock stands out with its comprehensive financial services, becoming a go-to hub. The company’s market cap surged from $4.1 billion in October 2022 to $7 billion in 2023.
That’s mainly because of SoFi’s expansion beyond student loans, becoming a digital banking hub with a user-friendly platform. The company attracts customers with modern convenience, low fees, and high-interest savings accounts. This approach appeals to on-the-go individuals, and particularly those in younger generational cohorts. Here’s why I’m still bullish on this fintech stock right now.
Strong Fundamentals and SOFI Stock
SoFi expanded its services beyond student loans to include various financial products like loans, bank accounts, trading accounts, and credit cards.
It competes with major digital banks and large U.S. banks but experienced rapid growth, with a 37% increase in revenue and 584,000 new customers in the third quarter, reaching 6.2 million, a 44% year-over-year rise that legacy banks can’t match.
SoFi has transformed into a one-stop financial hub, offering various services and gaining more customer use. This fuels its financial productivity loop, increasing income and lending capacity. SoFi’s bank reported profits in Q2 2023, and management aimed for GAAP profitability by year-end.
Trust and Be Patient With SOFI
SOFI stock saw choppiness in the latter half of 2023 due to market concerns about rising interest rates. However, the resumption of federal student loan repayments should boost SoFi Technologies in the short term.
This development benefits SoFi Technologies, which aids loan refinancing. High student loan interest rates, reaching up to 8.05%, make SoFi’s help a win-win. SoFi is becoming a preferred platform for Millennials and Generation Z, further solidified by its recent “All Your Ambitions, All In One App” campaign.
Effective Business Model
SoFi transformed into a comprehensive mobile banking solution, emphasizing cross-selling. By Q2 2023, they had 6.2 million members, growing 44% year-over-year, each using an average of over one product.
In the second quarter, SoFi’s total revenue was $498 million, a 37% year-over-year increase. Lending business revenue grew by 29% to $331 million, despite challenges in home loan origination because of rising interest rates. The financial services segment excelled, with revenue tripling to $98 million compared to Q2 2022.
This shows that SoFi’s business model is working, with more customers using multiple products and increased revenue per customer.
Outlook
SoFi stock has recovered some losses from earlier this year but could continue to rise in the coming months, with a potential catalyst from strong student loan demand. As borrowers seek refinancing ahead of higher rates, SoFi stands to benefit.
— Chris MacDonald
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Source: Investor Place