SoFi Technologies action appears to be the best way to play financial disruption
Although new trends are an integral part of today’s market, there is one dominant theme; you can’t go wrong with technology. Given the dominant position of technology companies on the S&P 500 IndexIt’s no surprise that disruptors now dominate conversations about investing. SoFi Technologies (NASDAQ:SOFI) is a technology disruptor making waves. SOFI stock is up 26.0% in the last month alone.
It’s easy to see why. FinTech now reaches 2.56 million members, with triple-digit year-over-year growth and sequential acceleration with even higher numbers. These new members will drive future revenue growth for SoFi as they become multi-product members.
The asset-light model is perfect for financial sector disruptions. As a result, SOFI will continue to grow in leaps and bounds. Yes, the price will fluctuate in parallel with the whole market. But there is no indication that the long-term thesis is in danger.
Mixed earnings should not deter SOFI stock bulls
In the last quarter, SoFi generated total net revenue of $ 166.3 million in its lending business, up from $ 95.9 million in the prior year period, which includes 18 102 mortgage loans, 981,440 product creations in the loan sector and 544,000 personal loan applications from clients. who have used its products to get a quick injection of cash into their lives when they need it most – during tough economic times.
Meanwhile, the company’s financial services segment closed at $ 17 million in revenue, a substantial jump from $ 2.4 million in the previous period. The directly attributable cost related to the sector was $ 41.8 million, bringing the contribution loss to $ 24.7 million. It compares favorably with the situation last year, where directly attributable expenses of $ 33.3 million resulted in a contribution loss of $ 30.9 million.
SoFi has seen a strong increase in its technological activity. You can thank the acquisition last May of Galileo Financial Technologies for outstanding performance in this area. This segment had nearly 79 million accounts in the second quarter of 2020, up from 36 million a year ago, and revenue grew almost 60%.
Despite these positive results, SOFI stock fell nearly 12% after-market when the results were revealed. The main reason was the news that SoFi expects a loss in the third quarter. EBITDA is expected to be between $ 7 million and $ 3 million for the third quarter, while revenue is expected to be between $ 245 and $ 255 million.
Meanwhile, Wall Street analysts are expecting a positive EBITDA figure of $ 11.8 million. But overall, for a company that doesn’t have a long history, these are great numbers.
Complete financial ecosystem
One of the most interesting aspects of SoFi is its financial ecosystem. The app makes all the options accessible on your phone while keeping track of everything. This means that you can manage your finances easier than ever before.
Imagine opening an account with SoFi Money to supplement your current bank. But you can also invest in stocks and trade cryptocurrencies, as they are available through the same platform. It increases the lifetime value of each member by reducing their relevant acquisition costs, while increasing convenience for the end user.
Some investors have a bearish view due to the diversification of the model. While this can be seen as a weakness, I see it in a more positive light. SoFi’s ability to provide services for various needs will provide them with better access and opportunities than if they only focused on a single product or service, which would reduce revenue growth as other companies are already providing what this company offers (but maybe not at such high quality).
Sofi has always been focused on diversification, offering many different financial products through multiple providers under one roof, so that you no longer have spreadsheets full of transactions when all of your loans need attention. . And the best part is that the company has not finished innovating.
While it already has plenty of cash, it announced a $ 1.1 billion convertible note offering. Investors were not happy with the leverage and possible future dilution, leading to a sell off. However, SoFi needs these funds to meet the liquidity requirements of a banking charter. Purchase Golden Pacific Bank was part of that goal. And it is also a step in the right direction.
What future for Sofi Stock?
Investors are often looking for innovation-driven opportunities and forward-looking companies that never hesitate to take risks when it’s needed most. SoFi’s business is healthy and growing. There’s not much to suggest that this growth will slow down anytime soon. The only problem investors might have is knowing when to enter, as stocks are on the rise right now.
The chart above shows that the price is in an uptrend. However, it all depends on whether you want to take a long-term approach. Shares regained ground lost after the results were released. But there will be jerks along the way, and you can take advantage of that. On the other hand, if an investor takes a long-term approach, SOFI stock is likely to have an excellent one-year return.
At the date of publication, Faizan Farooque had (directly or indirectly) no position in the securities mentioned in this article. The opinions expressed in this article are those of the author, subject to the publication guidelines of InvestorPlace.com.
Faizan Farooque is a contributing author of InvestorPlace.com and many other financial sites. Faizan has several years of stock market analysis experience and was a former data reporter at S&P Global Market Intelligence. His passion is helping the average investor make more informed decisions about their portfolio.