Why Did SoFi Stock Go Up?

The company went public through a Special Purpose Acquisition Company (SPAC) transaction in December 2020 and shares hit an all-time high of $25.14 in early 2021. Then SOFI hit headwinds, with the stock dropping to a low of $4.24 in late 2022. But SOFI has soared over 100% year-to-date to where the stock currently trades at around $9.

Industry turmoil is part of the reason why SOFI struggled, but investors’ main concern was the recent push for student loan forgiveness. Student loans are a significant portion of the company’s revenue, and there were fears that the pause on student loan payments and the possibility of total loan forgiveness would negatively impact SoFi’s bottom line.

However, recent legislation has put an end to the pause on student loan repayment, and widespread student loan forgiveness seems less and less likely. So, why did SoFi stock go up? Because SoFi has continued to drive revenue and subscriber growth in spite of a tough environment, investors have rushed to buy back in to the financial services company.

Now the big question is will SoFi stock keep going up?

SoFi: Top 10 Bank?

The digital banking company began in 2011 and the founders chose the name SoFi as an abbreviation of Social Finance. The company’s mission was to provide less expensive higher education loans, and some of SoFi’s initial customers were students at Stanford University.

Since then, the San Francisco-based personal finance company has expanded far beyond student loans. SoFi now offers nearly 8.6 million total products, including everything from personal loans to credit cards to crypto and stock investing to checking and savings accounts.

The company has continued to expand its brand and its products. In 2022, SoFi achieved a major milestone when it was a awarded a national charter as a banking institution. The $22.3 million purchase of Golden Pacific Bancorp that same year gave SoFi the platform to hold loans for its own investment purposes.

The company’s digital-first brand has enjoyed high adoption with Gen Z and Millenials. SoFi leveraged its popular platform to become a massive corporation with 4,200 employees. The company currently has a market capitalization of $8.53 billion and its CEO has boldly stated that he believes the firm will be a top 10 banking institution in the US.

SoFi Is a Digital First Bank

SoFi’s goal is to be the one-stop provider for all of its members’ banking needs. Though the company offers conventional banking accounts, its digital-only model means there are no traditional branches. SoFi currently operates across three segments: Lending, Financial Services, and Technology Platform.

The Lending segment is by far the most profitable for SoFi, accounting for GAAP net revenue of $337.1 million in the first quarter, a nearly 33% increase from last year. This segment includes student loans, as well as personal, home, and other lending products.

The Technology Platform brought in $77.9 million of SoFi’s net revenue in the first quarter, which was a 28% increase year-over-year. This division includes income from the Galileo and Technisys cloud-banking platforms, brands that were recent major acquisitions for SoFi.

The Financial Services business accounted for $81.1 million of the company’s net revenue, a 244% increase from last year. The skyrocketing growth is due to the approval of the bank charter, which has allowed the company to expand its bank account offerings.

Revenue Continues To Soar

The company’s first-quarter GAAP net revenue of $472 million was 43% higher in 2023 than in the previous year. The growth was driven by 433,000 new member adds, a 46% increase year-over-year. The subscribers added in the first quarter brought SoFi’s total members to almost 5.7 million.

Despite the increase in members and revenue, SoFi is still operating at a net loss. But the net loss of $34.4 million in the first quarter was a 69% decrease from the net loss of $110.4 million in the first quarter of 2022. And profitability is in sight, with the company’s leadership expecting to turn a profit by the final quarter of 2023.

With the company’s P/S ratio just below 5, SoFi is in line with the industry, and in a better position than many of its competitors. Another positive sign for the company is its nearly $2.5 billion in cash and cash equivalents, which shot up from $1.4 billion just last quarter.

Analyst Ratings for SoFi

11 out of 18 analysts rate the stock as a Hold, and 6 analysts rate it as a Buy. The most bullish forecast has the stock reaching $14 over the next 52 weeks, a 52% increase from where the stock currently trades. The median forecast predicts the stock will drop slightly over the next 12 months, taking an 18% plunge to $7.50.

There is one sell rating on SOFI, with the most bearish analyst forecasting the stock will plummet over 67% down to around $3. Concerns cited are that the stock has become overvalued, and that there’s still uncertainty around the company’s student loan business and the financial industry as a whole.

Is SoFi Stock a Buy?

SoFi is a digital financial company that has experienced incredible growth over the past few years. The company has continued to increase revenue and subscribers in a tough time for the banking industry.

The main concern about SoFi is the possibility of student loan forgiveness, but the likelihood of full loan forgiveness is lessening. The company has made significant strides toward profitability and should reach that milestone in the coming year.

That’s the reason why SOFI has experienced such an impressive increase over the past few months. But will it continue to go up? Considering the company’s continued growth, cash on hand, and a clear path ahead, it’s likely that the stock will continue its positive trend over the next year.

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