SoFi Technologies (SOFI) has set its sights on becoming the the “Amazon Web Services of Fintech.” On Tuesday, the company announced a development which could move it closer to that goal.
The company said it is acquiring multi-product core banking platform Technisys. The all-stock deal will cost $1.1 billion and will provide Technisys shareholders with 84 million shares of SoFi stock (resulting in 10% dilution, so in the near-term will likely impact profit). The deal should close in 2Q22.
So, what does Technisys bring to the table?
In the US and Latin America, the cloud-native platform already serves more than 60 established bank, fintech, and non-financial brands. Per SOFI, put to work with its existing technology platform Galileo, the company will be able to offer a multi-product core financial platform which is customizable and which in one tech stack boasts both UX/ UI streamlining and payment processing abilities.
Technisys is currently growing at a faster pace than SOFI’s Tech Platform segment, having delivered revenue of $70 million in 2021, amounting to a 24% uptick from 2020. Through 2025, the acquisition is expected to add a cumulative $500-$800 million in revenues. Meanwhile, between 2023 to 2025 the addition should also result in cumulative cost saves between $75 to $85 million.
Given the competitive US market, Oppenheimer’s Dominick Gabriele thinks the deal “strategically makes sense.”
“We expect revenues to build over time with more weighting to years 2024-25 given revenue synergies and cross-sell building momentum,” the analyst went on to add. “The NT opportunity of revenue stems from cross-selling between SOFI’s Galileo and now Technisys’ customer base. With a mid-teens IRR (internal rate of return) through 2025E, expect EBITDA margin accretion over time.”
Overall, there’s no change to Gabriele’s Outperform (i.e., Buy) rating or $18 price target, which suggests room for 83% growth in the year ahead. (To watch Gabriele’s track record, click here)
Most on the Street agree with Gabriele’s take, though not all are on board; based on 8 Buys vs. 3 Holds, the stock boasts a Moderate Buy consensus rating. The average target stands at $18.85, representing potential one-year upside of 92%. (See SoFi stock forecast on TipRanks)
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Disclaimer: The opinions expressed in this article are solely those of the featured analyst. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.
