SoFi Technologies (SOFI) stock ought to be flying now, but sometimes investors can be slow to react. Oddly enough, the stock barely moved (as you can see below) after SoFi Technologies published generally solid quarterly results and encouraging forward guidance. Consequently, I am bullish on SOFI stock and am waiting for the “other shoe to drop,” but in a good way.
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SoFi Technologies is a financial technology or fintech company. It’s a legitimate bank and lender with a U.S. banking charter, and young savers might appreciate SoFi Technologies’ high-tech personal finance app with robust features.
I’d even go so far as to claim that SoFi Technologies represents the future of technology-enabled banking. The company could eventually pose a serious threat to old-fashioned banks. As we’ll discover, SoFi Technologies is profitable and has a fast-growing membership base. It’s surprising, then, that the market isn’t enthused about SoFi, but this means investors have a chance to pounce while others don’t even realize what they’re missing out on.
The SoFi Army Is Growing
Before SoFi Technologies can achieve good financial results, the company has to build an army of loyal customers. As it turns out, SoFi’s user base is growing rapidly, and it appears that this is having a positive knock-on effect on the company’s financials.
I’m not saying that the executives of traditional banks should be shaking in their boots. Yet, they ought to be concerned about SoFi Technologies’ expanding membership. Impressively, SoFi added more than 643,000 new members in 2024’s second quarter. With that, the company’s total member count reached nearly 8.8 million, having increased by over 2.5 million compared to the prior-year period. This represents a whopping 41% membership increase, and I doubt that any of the old-fashioned U.S. banks can claim this growth pace.
Borrowers Aren’t Running for the Hills
It’s no secret that interest rates are high, and investors might fear that this will cause potential borrowers to run for the hills. Yet, SoFi Technologies CEO Anthony Noto assured that borrowers haven’t all gone away. “Despite the rate environment and our conservative stance in lending, we drove sustained strong results in the quarter and are ready to move quickly once things improve,” Noto declared.
SoFi Technologies’ Q2-2024 Lending segment results seem to support Noto’s optimistic tone. This segment’s adjusted net revenue grew 5% year-over-year to $339.1 million. Within the Lending segment, net interest income rose 20% year-over-year, driven by “higher loan balances and yields.”
If these results don’t impress you, then perhaps we need to put the data in context. The current U.S. government has a history of canceling and/or forgiving federal student loan debt. SoFi Technologies refinances student loan debt, and it has had to deal with high interest rates and a challenging environment for education lenders.
So, even though the presidential election hasn’t happened yet, investors should consider all possible outcomes. If interest rates come down and/or changes in the U.S. government prompt a slowdown in student loan forgiveness policy, SoFi Technologies’ Lending segment revenue could ramp up quickly in 2025.
SoFi Technologies Stock Barely Moves Despite Good Results
SOFI stock wavered slightly today, going slightly green and then slightly red for a while. It’s a strange and unexpected response to SoFi Technologies’ good Q2-2024 results and forward guidance.
As I mentioned earlier, it makes sense that membership growth would lead to better revenue and income. Thus, SoFi Technologies’ Q2-2024 adjusted net revenue of around $597 million represented 20% year-over-year growth and surpassed the consensus estimate of $565 million.
Since SoFi Technologies’ sales jumped by 20%, it makes sense that the company raised its full-year 2024 adjusted net revenue guidance range. The company’s previous outlook called for 2024 revenue of $2.39 to $2.43 billion, but now SoFi is calling for full-year revenue of $2.425 to $2.465.
Finally, SoFi Technologies earned $0.01 per share on an adjusted basis, thereby beating Wall Street’s consensus forecast of a breakeven quarter. This doesn’t tell the full story, though. In total-dollar terms rather than per-share terms, SoFi Technologies’ net income/loss flipped from a $47.549 million loss in the year-earlier quarter to an income of $17.404 million in Q2 of 2024. Now, that’s what I would call a dramatic improvement.
Is SOFI Stock a Buy, According to Analysts?
On TipRanks, SOFI comes in as a Hold based on four Buys, nine Holds, and three Sell ratings assigned by analysts in the past three months. The average SoFi Technologies stock price target is $8.15, implying 11.2% upside potential.
Conclusion: Should You Consider SOFI Stock?
The market couldn’t seem to muster any real enthusiasm for SoFi Technologies after the company posted decent results and raised its full-year revenue outlook. This is a blessing in disguise, especially if you’re an opportunistic contrarian investor.
Maybe the market will have a delayed, positive reaction in a few days or weeks. There’s no point in trying to guess what will happen in the short term, though.
Instead, investors should review SoFi Technologies’ results and guidance and decide if there’s a mismatch with the market’s reaction. With that in mind, I am bullish on SOFI stock and would consider buying shares today.
