The banking sector in the U.S. has a few notable players who boast the majority of American customers. For example, the three major banks in America – JPM Chase Bank (JPM), Bank of America (BAC), and Wells Fargo (WFC), have 218 million customers combined. Therefore, it’s hard for any new player to come in and make any difference. However, Sofi Technologies (SOFI) is trying to accomplish exactly that. Last week, writer David Moadel elaborated on SoFi’s success, but for now, here are three reasons why SOFI is on the right track:
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- Second quarter results: It’s a bit of a surprise that after posting its promising Q2 results, SOFI stock hasn’t moved much and remained at the same price. Its revenue grew by over 20% to $598 million, beating consensus estimates of $565 million. It also turned losses into profits, with a $17.4 million income for Q2 after posting a $47.5 million loss for the same quarter last year. EPS was $0.01 for the quarter, compared to the negative 0.06 per share posted in the same quarter last year.
- Lending: When SoFi was founded, lending was the main segment. Since then, it have diversified and become a complete bank with all its services. The benefits of digital space have allowed the company to offer much lower interest rates to its customers. Today, when interest rates are notoriously high and people try to avoid loans, one would expect a decline in the segment. However, SoFi has posted an increase of 5% in adjusted revenue year-over-year within the lending segment and a 20% increase in net interest income.
- Growing clientele: In the second quarter of 2024, SOFI added 643,000 new customers, bringing the total to 8.8 million. Its expansion strategy involves Latin America as a prime target, and after the acquisition of Galileo Financial, which is licensed to operate in this vast region, the door is very much open for them to increase its ever-growing clientele and revenue.
Summary:
SoFi Technologies didn’t set the world alight until now, but one would expect it would turn some heads after its recent Q2 results. Nevertheless, the company is making positive strides toward its goal of bringing financial solutions to its ever-growing customers. For now, it seems like it’s only a matter of time before the company grabs Wall St.’s attention, so investors might want to consider the stock while it’s priced at a discount.
