With $SoFi Technologies Inc.(SOFI)$ reporting a strong quarter and officially hitting profitability, some may find it surprising to see drop in its stock price. Despite beating earnings expectations, raising guidance for 2024, and showing rapid expansion in its member base and product offerings, SoFi’s stock has struggled to gain the traction one might expect given these fundamentals. However, I believe the recent market behavior has created an attractive entry point as SoFi continues to prove its value as a fintech disruptor, shifting from growth mode to sustainable profitability.
In Q3 2024, SoFi achieved an EPS of $0.05 (diluted), beating expectations of $0.04, and an adjusted net revenue of $689 million. SoFi’s financials are trending positively, largely due to robust growth in its Financial Services and Tech Platform segments, which collectively rose by 64% YoY and now represent almost half of total revenue. The company also raised full-year earnings guidance to a range of $0.11-$0.12 EPS, up from the previous guidance of $0.09-$0.10, which signals that management is confident in sustained profitability for the foreseeable future.
SoFi has taken significant steps to diversify revenue streams, prioritizing a shift toward capital-light, fee-based revenue sources. This shift has included major advancements in SoFi’s tech platforms Galileo and Technisys, which underpin its fintech solutions and generate “higher ROE, fee-based revenue streams,” according to CEO Anthony Noto. Galileo’s addition of the GScore fraud protection system reflects an investment in secure and scalable tech, which I believe strengthens SoFi’s competitive edge and solidifies it as a leader in secure fintech infrastructure.
In terms of assets, SoFi ranks as the 69th largest bank in the U.S. as of June 2024, climbing from 449th just two years ago. The rapid ascent is a result of strategic moves, including its expansion in lending operations via a $2 billion loan agreement with Fortress Investment Group and its anticipated role as a core tech provider for a top-five U.S. bank. Additionally, major upcoming events at SoFi Stadium, including the 2026 FIFA World Cup and Super Bowl LXI, only add to SoFi’s visibility and brand power, which are likely to accelerate its path to becoming a top-ten institution, as Noto hinted.
Why the Stock is Down Despite Positive Fundamentals
One reason SoFi’s stock is down, despite posting such positive results, could relate to the broader market context. Interest rates have had a general impact on fintech and tech-adjacent stocks, as their growth potential may appear less compelling in the short term compared to higher-yield fixed-income assets. Furthermore, SoFi is currently transitioning from its earlier, highly aggressive growth phase to a more stabilized, profitability-driven model. This change may have given some investors pause, as such shifts can lead to brief periods of volatility until stability is further established.
SOFI Daily Chart
Additionally, many institutional investors are still in the process of “loading up” on SoFi stock, as evidenced by recent volume patterns and accumulation data. I believe that as the stock approaches the next earnings season, more institutional players will announce higher price targets, buoying the stock to new highs.
The Case for Long-Term Growth
SoFi is on track to emerge as one of the fastest-growing, profitable fintech firms in the U.S. SoFi’s APY, which is up to 430 times higher than some major banks, has been a key factor in its rapid member growth. With the upcoming launch of its AI-powered “Cash Coach” and the added security offered by the Galileo GScore, SoFi is well-positioned to attract a younger demographic eager for tech-driven financial services.
SoFi’s upcoming events and partnerships, including Galileo’s move into commercial banking services and potential major contracts with larger banks, suggest that the company has only begun to scratch the surface of its growth potential. With both foundational technologies and member interest in place, I see SoFi as a powerful long-term play in the fintech space, deserving multiples much higher than a traditional bank.
Conclusion
SoFi’s stock, in my view, is currently at a pivoting point. With profitability achieved, revenue streams diversified, and a customer base that continues to grow, the pieces are in place for SoFi to rally as positive sentiment builds. As the company continues executing on its financial and technological innovations, I believe Wall Street will catch up to the customer-driven growth story unfolding at SoFi, making the current price levels a compelling entry point for investors with a long-term horizon.
@MillionaireTiger @Tiger_comments @Daily_Discussion @CaptainTiger @Tigersg
Disclaimer: This is a general analysis and not financial advice. Always conduct your own research before making any investment decisions.
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