The fintech company SoFi Technology (SOFI) sought to revolutionize the way consumers bank. Many investors had high hopes for it. Yet SoFi stock fell [last] Tuesday – and eventually halted the trading of shares – after the early accidental release of its first-quarter results.
At one point, shares were down by more than 18%.
The thing is… the company’s first-quarter earnings weren’t all that troubling.
While the fintech company reported a net loss per share of $0.14 on total revenue of about $330.4 million, the company’s earnings were in line with estimates; revenue easily beat out Wall Street expectations.
So, what does all this mean? Well, this drawback offers investors the chance to buy this fintech stock for penny stock prices – and reap the rewards as SoFi mounts its eventual comeback in due time.
Many investors started to sell off the stock because SoFi’s revenue guidance for the second quarter – and for 2022 – was less than anticipated. While many investors bailed on SOFI stock for projected weakness, I wouldn’t be so quick to write the fintech stock off completely.
Why Buy Shares of SOFI Now?
At the end of the day, it’s a numbers game for SoFi.
It helps that the fintech’s user base is incredibly loyal. The result is higher engagement. In fact, before the pandemic shut everyone indoors, users put together meetups in different cities to build a community. That simply doesn’t exist in traditional banking.
Both user growth and loyalty are essential to SoFi’s business model. In its latest report, the company added over 400,000 new members for the quarter, growing its total membership to 3.87 million. And SoFi added another 10 million accounts to Galileo, its tech platform.
SoFi’s lending segment brought $252 million in revenue. This division had a contribution profit of $132.7 million – the highest either has generated. And the fintech’s lending division brought in more than $2 billion from personal loan originations.
Meanwhile, the student loan side of the business fell significantly from the previous quarter due to the pause on student loans being extended. But that’s not going to last forever. As of now, that pause ends on Aug. 31. Once it starts back up, the student loan sector will begin to move higher once again.
Even though profit contributions from SoFi’s financial services and technology segments fell from the previous quarter, both generated record revenue.
The financial services added 212,000 new accounts to its online brokerage, SoFi Invest, and 188,000 depository account. And since then, SoFi was officially approved to function as a full-fledged bank. The fintech company brought the $1.2 billion in deposits it was likely storing elsewhere onto its balance sheet.
SoFi’s proven itself as a fintech company making moves to encourage future growth. The trouble is, it’s in a rough patch at the moment. Once the dust settles and the sell-off ends, we wouldn’t be surprised to see SOFI stock move higher.
SOFI Stock Price Prediction: Potential Gains of 300% or More
In fact, SoFi is still growing at a nice clip. It continues to exceed revenue expectations, even with a slowdown in student loan activity. This is an excellent sign for the fintech stock.
And again, even though the pause on student loans has been extended quite a few times, it won’t last forever. Once that cycle starts again, SoFi will see student loan revenue rebound.
One of the most significant changes for SoFi in 2022 is the fintech company is now officially a bank. This will allow SoFi to potentially make even more money on its loans by holding and collecting recurring monthly interest payments for more extended periods.
Overall, SoFi is heading in a positive direction – one that makes now as good a time as ever to invest in this fintech stock as a long-term buy.
In fact, analysts over at CNN set a reasonable price prediction for SOFI stock at $11 per share. If you were to invest in shares of SOFI stock today, you could see returns just shy of 100% over the next 12 months. But we wouldn’t be surprised if SOFI stock doubles that and hits $22 per share, offering potential returns of up to 300% over the long run.
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Source: Money Morning