SoFi Technologies (NASDAQ:SOFI) had been turning heads ever since it was announced as a merger target for Chamath Palihapitiya’s Social Capital Hedosophia Holdings Corp. V.
The newly public fintech platform plans to evolve into a full-stack ecosystem that effectively caters to the financial needs of the younger generation. The company’s digital footprint, innovative DNA, and consumer-first approach will likely result in massive SOFI stock gains.
SoFi completed its IPO merger on June 1 and proceeded shed more than 24% of its value. However, that shouldn’t be much of a concern for investors, as it’s still in price discovery mode.
Average analyst price targets point to a whopping 80% upside over its current value. SOFI stock should start picking up the pace around the time it releases its first earnings results after completing its merger.
Let’s dive a little deeper to understand why SoFi is the fintech pioneer that could challenge the big banks.
Unique Solution and Profitability
SoFi Technologies is aware of the problems that young consumers have with big banks and has tailored its platform accordingly. Firstly, it has done an excellent job managing its student lending business, which is also a pain point for most young borrowers. However, the goal is to offer a full suite of financial services to its customers through its SoFi app. The app effectively allows you to invest, save, borrow, and carry out other financial tasks in one place. Moreover, it also incorporates financial education to create a more customer-friendly experience.
Profitability has so far eluded SoFi, but things should change drastically next year and beyond. It expects its margins to get a boost after its bank charter to improve its unit economics further. Additionally, the company has taken over a community bank to speed up the review process. The charter would allow SoFi to operate as a traditional bank. However, its digital footprint creates an incredible overhead advantage for the company.
Timing is Everything
SoFi couldn’t have gone public at a better time, as it has been killing it on the financial front. It reported a massive 151% increase in its revenues to $216 million on a year-over-year basis in its first quarter. Moreover, its lending generated the bulk of its revenues at roughly 76% of total sales. The segment generated a healthy $168 million in revenues and was up a substantial 106% from the prior-year period. Additionally, its financial services segment was up 200% year-over-year to $6.46 million.
The company’s technology platform, led by its flagship fintech offering Galileo, generated $46 million in revenues. Galileo serves roughly 70% of the top 100 fintech companies in the world at this time.
What’s more impressive is SoFi’s future growth runway. It has reiterated its previous guidance of a 58% growth rate on $980 million on a year-over-year basis for 2021. Moreover, it expects to generate $3.7 billion in revenues by 2025, even without the bank charter it has applied for recently. Additionally, it also guides that adjusted EBITDA will be at $1.17 billion, which should rise to $1.5 billion with the charter. If the charter is granted, you’d expect SoFi to comfortably cross $4.5 billion to $5 billion by 2025.
Bottom Line On SOFI Stock
SoFi attempts to solve the long-standing problems in the financial world. Its diverse offering, particularly with the Galileo platform, makes it a stand-out investment in the fintech realm. It’s still early days for SOFI stock, but I expect the stock to start gathering momentum soon. Hence, with an incredible growth runway ahead, SOFI stock is one for the long haul.
On the date of publication, Muslim 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.
Muslim Farooque is a keen investor and an optimist at heart. A life-long gamer and tech enthusiast, he has a particular affinity for analyzing technology stocks. Muslim holds a bachelor’s of science degree in applied accounting from Oxford Brookes University.
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