SoFi Technologies (NASDAQ:SOFI) started out in 2011 as a digital platform that helped people refinance their student loans. Since then, the company has expanded to offer all kinds of digital financial services such as investing, banking, mortgages, credit cards, and more.
SoFi currently has the most diversified product suite when compared to any other neobank in the United States. Its also targeting a high-income demographic even though most of its competitors are looking at underserved regions. The company owns the FinTech platform called Galileo which powers many other neobanks, adding another source of income.
SOFI stock went public earlier this year but has failed to deliver a positive ROI as of date. As of September 8th, SOFI stock is down 15% year to date. But does this mean a buying opportunity or should you avoid this stock?
SOFI stock remains a strong bet
SoFi Technologies has witnessed a growth in membership of 90% over the past year. The company currently counts a total membership of 1.85 million people. This large customer base can largely be credited to SoFi’s diverse range of products and offerings.
It aims to sell to customers throughout their life. Starting from student loan financing for graduates to mortgages for young employees, SoFi purports to do it all.
This also forms a great business model since the company can “cross-sell” its services. For example, a user may sign up to use SoFi’s brokerage services but they may end up taking out a loan from the company as well.
Each of its services has witnessed double-digit or triple-digit growth over the past few quarters, showing the robustness of the company’s current business model.
SoFi Technologies will benefit from digital transformation
Digital transformation is taking over. For those unfamiliar with the term, it refers to the increasing digitization of our lives and businesses. Finance is being taken over by fintech, education is being taken over by edtech, money is now being digitized by cryptocurrencies, while marketing is being taken over by Martech solutions.
The ongoing digital transformation spells great news for neobanks such as SoFi. The company aims to be a full-service digital replacement for a large number of banking services. It is also working on acquiring Golden Pacific Bancorp.
The acquisition of the bank could greatly speed up the process of gaining a national bank charter for SOFI. Once it gets the charter, it can quickly scale up its various offerings especially its lending business.
This can be critical since SoFi’s lending arm is currently its leading revenue generator. In 2020, lending accounted for 86% of the company’s revenues.
What next for SoFi stock?
SoFi has not done as well as expected this year due to the lock-up expirations of its early investors. These investors booked their profits from SOFI stock once it went public, causing a decline in its price. However, this effect is expected to be transitory and the stock may turn bullish quite soon.