SoFi (SOFI) stock price has staged a strong comeback in the past few weeks as investors focus on the Federal Reserve and the recently-started earnings season. It soared to a high of $9.01, its highest level since March 4th, and 50% above its lowest level in August.
All-rounded company
SoFi is one of the fastest-growing financial services companies, especially among young Americans.
The company initially started its business focusing on the student loan industry, where it offers financing and refinancing.
Over the years, it has increased the number of services and even attained a banking license in the United States.
It has also created additional services in its ecosystem, including Money, Invest, Relay, credit cards, and insurance, among others.
SoFi hopes to provide all services that most young people needs in their financial journey. Through its platform, they can invest in stocks, ETFs, and other assets. Users can also take advantage of its robo-advisor, which automates its investment process.
SoFi users can also get access to credit cards, get life insurance, open a high-yield account, and access other financial services.
According to its 10k statement, the company has three reportable segments: lending, technology, and financial services. Lending is where it provides different types of loans to its customers and then makes money through interest. In this business, the company benefits from higher interest rates, which increases its net interest income.
In its technology business, it provides its services to businesses in the United States, Latin America, and Asia. This business includes Galileo, the fintech company it acquired for $1.2 billion in 2020.
Its financial services business is made up of other services like Money – checking and savings accounts-, Invest, credit cards, protect, and travel.
SoFi’s business has been growing
SoFi’s business has been growing in the past few years, with its total revenue growing from over $442 million in 2019 to over $2.067 billion in the last financial year. Revenue in the trailing twelve months (TTM) has risen to over $2.3 billion.
This growth has happened as the number of customers in its platform has jumped from over 1.8 million in the first quarter of 2020 to over 8.7 million in the last quarter. This means that it counts about 2.7% of Americans are its customers. Its Galileo product has over 158 million accounts.
The most recent results showed that SoFi’s business was doing well. Its revenue rose to $597 million from the $489 million it made in the same period last year. This revenue figure was higher than the higher side of its guidance of $565 million.
SoFi’s profit was also higher than its guidance as its adjusted EBITDA rose to $138 million, higher than the upper side of the range at $125 million.
The next important catalyst for the SoFi stock price will be its quarterly earnings scheduled for October 29. Analysts expect the revenues to show that its revenue rose to $632 million, inside its guidance of $625 million and $635 million.
Its adjusted EBITDA will be between $160 million and $165 million, while its net income will be between $40 million and $45 million. Historically, SoFi’s results have been better than estimated.
The case for SoFi
There are several reasons why SoFi’ stock has more upside ahead. First, the company has a diversified business model, which helps it to do well in different market conditions. Higher volume in its financial services business will likely offset the decline in the net interest margin as interest rates start falling.
The Federal Reserve has already started cutting interest rates. In its last meeting, it slashed rates by 0.50%, and hinted that more cuts were coming. As results by companies like JPMorgan and Wells Fargo showed, net interest margin has already started moving downwards.
Lower interest rates could even benefit the company as the volume of originations in the US rise.
Second, the company has a large addressable market, as the US population and college enrolment increase. Data by Statista shows that college enrolments will hold steady at almost 20 million by 2031. Third, SoFi has room to boost its profits as it continues to focus on growing its margins.
Read more: SoFi stock is cheap; comeback could be epic
SoFi stock price analysis
The daily chart shows that the SoFi share price has done well in the past few weeks. It recently jumped above the key resistance point at $8.07, its highest point on July 18.
Most importantly, it has formed a golden cross pattern as the 50-day and 200-day Exponential Moving Averages (EMA) have crossed each other. A golden cross is often a rare pattern that leads to substantial gains.
Therefore, the stock will likely keep rising as bulls target the next point at $10.50, its highest point in December. This gives it a 16% upside from the current level.
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