Why This Speculative Fintech Stock Is One to Watch

Stock Market

Following its recent earnings report, SoFi Technologies (NASDAQ:SOFI) stock initially surged, but has since retreated. Despite the pullback, the overall story on this formerly speculative stock remains positive.

After its earnings, SOFI stock fell 18%, falling from around $10 per share to $8.17 at the time of writing. While such a move may certainly be frustrating, it’s important to distinguish between investing and speculation.

Far from making it a speculative stock, earnings confirmed SoFi’s business model, and short-term fluctuations are just temporary.

That said, there’s no need to worry about the SoFi. We’ll delve into why I’m watching the stock and why speculators should keep an eye on it.

Not Such a Speculative Stock

Sofi Technologies‘ (NASDAQ:SOFI) recent positive results and updated guidance led to a favorable market response. Last quarter showed substantial growth, exceeding expectations with $498 million in net revenue and $76.8 million in adjusted EBITDA.

The company also raised its 2023 outlook and key metrics like total deposits and membership are progressing well.

SOFI stock surged 20% on strong results but has since fallen back. Another analyst criticized its valuation, echoing previous concerns from Morgan Stanley’s (NYSE:MS) Jeffrey Adelson.

That said, I think the company’s strong financials and robust growth profile result in a deservedly high multiple, particularly in this stage of SoFi’s growth trajectory.

The Buying Opportunity is Strong

A rise is foreseeable, aiming for $10 and potentially $15 per share. Earnings suggest SoFi could reach GAAP profit by Q4 2023, which could boost the market’s confidence. Positive Q3 and upcoming results could surpass predictions.

Analysts like those at Mizuho suggest the market might overlook the potential growth because of the end of the student loan moratorium. SoFi’s focus on underserved high earners could allow the company to gain a substantial share from big banks.

I think SoFi will retain its status as one of the best avenues for student loan borrowers to refinance their debt at attractive levels. This is one fintech stock with some likely very impressive loan demand over the next year or two, leading to out-performance relative to its peers.

What Now

Hold on to your SOFI shares. Solid results ahead could dispel past doubts and boost performance. Indeed, this is a stock I think long-term investors should consider adding to, for those who are bullish on its future.

For those not invested, now is a good time to consider starting a position in SOFI stock despite volatility. The fintech company shows robust growth, potential for positive earnings, and multiple growth drivers.

The delayed banking “golden age” due to COVID and recent crises will benefit banks like SoFi when interest rates improve. Government actions against crypto may actually help SoFi by avoiding risks.

SoFi’s focus on young, sophisticated savers aligns well with future trends. Despite various setbacks, I remain bullish on SoFi over the medium-term.

On the date of publication, Chris MacDonald did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

Chris MacDonald’s love for investing led him to pursue an MBA in Finance and take on a number of management roles in corporate finance and venture capital over the past 15 years. His experience as a financial analyst in the past, coupled with his fervor for finding undervalued growth opportunities, contribute to his conservative, long-term investing perspective.

Articles You May Like

First Solar jumps on strong quarter, record backlog in rare bright spot for beaten-down renewable sector
The Investor’s Flight Path: Timing Your Entry Into JOBY Stock
3 Essential Battery Stocks That Will Charge the Future
NIO Stock Is Getting Wrecked. Expect the Pain to Only Get Worse.
3 AI Stocks You Should Be Buying Hand Over Fist in Q1