SoFi Technologies (NASDAQ:SOFI) offers an interesting case study in how the performance of a stock and the underlying business it represents don’t always align as expected. Normally, a company with growing revenues and strong guidance should experience rising share prices.
However, for SoFi, the past few years have shown that the market can behave differently. Despite the digital bank tripling its revenues since going public in 2021, its stock price has declined by roughly a third over the same period.
Meanwhile, SoFi continues to expand its financial services portfolio and grow its customer base, which is approaching 9 million. Moreover, with interest rates on the decline, its lending business is positioned to seize new opportunities as consumers seek more affordable financing options.
Still, the stock remains down 20% this year.
How to explain the discrepancy? According to the investor known as Stone Fox Capital, the answer lies in investors’ fixation on skyrocketing AI stocks, blinding them to the gem hiding in plain sight.
“SoFi Technologies, Inc. has experienced significant revenue growth since going public, yet its stock remains undervalued, presenting a strong buying opportunity for investors,” writes the 5-star investor. “The mistake most investors make is chasing the hot stock, not the hot growth company ignored by the market.”
Stone Fox points out that SoFi continues to grow its slew of financial services, including a subscription option that allows customers to invest in alternative assets, get in on IPOs, and work with certified financial planners.
The investor is also optimistic that SoFi will also benefit from various opportunities spanning “SME business checking and lending to insurance to new geographies.”
This is all the more impressive, Stone Fox notes, as SoFi revenues are set to expand in 2024 despite decreasing loan revenues. Now, believing that “additional rate cuts could set up a big 2025,” the investor spots a promising opportunity for investors.
In summary, Stone Fox encourages investors to take advantage of SoFi’s low valuation, while maintaining a Strong Buy rating on the stock. (To watch Stone Fox Capital’s track record, click here)
However, Wall Street analysts remain more cautious. SoFi currently holds 5 Buy, 6 Hold, and 3 Sell ratings, resulting in a consensus Hold rating. The 12-month average price target of $8.27 suggests a modest 5% upside. (See SOFI stock forecast)
To find good ideas for stocks trading at attractive valuations, visit TipRanks’ Best Stocks to Buy, a tool that unites all of TipRanks’ equity insights.
Disclaimer: The opinions expressed in this article are solely those of the featured investor. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.
