SOFI Stock: Liquidation and Banking Charter Mean It’s a Great Time to Invest


SoFi (NASDAQ:SOFI) is arguably one of the best fintech companies in the world. However, SOFI stock has lost more than 50% of its value over the past year. Additionally, short-term interest in the stock has increased significantly over the past few weeks, indicating increased selling pressure ahead. Therefore, the stock is likely to fall further, which presents a great opportunity to recover the stock in the long run.

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With the recent tech selloff, investors need to remain patient. Naturally, with young growth stocks such as SoFi, there is likely to be a lot of volatility.

Additionally, the current sell-off may present a great opportunity to stock up on the most promising growth stocks. SoFi, in particular, is set to explode this year, especially after its banking charter was approved. Therefore, with multiple growth catalysts ahead, it is best to invest in SOFI stocks at such attractive levels.

The Bank Charter

SoFi became the first mobile fintech platform to become a bank. It had applied for a charter last year, and the approval of its application by the Office of the Comptroller of the Currency marks an important step in its evolution.

The banking charter allows the company to ditch the middleman, offering lower interest rates. Additionally, it will allow the company to expand its competitive advantage in credit and financial services, which has been key to its growth over the past two years. The company’s customer growth rates have increased dramatically during the pandemic, with a customer base of over 3 million.

The company’s growth is tied to its financial services business, which has seen the highest customer adoption. Additionally, with Charter Banking, SoFi’s customer acquisition and monetization will improve significantly. Additionally, the charter will significantly expand the company’s market potential, reduce borrowing costs, and open up cross-selling and up-selling opportunities. The development is incredibly positive, but it will also lead to higher compliance costs.

Additionally, to expand its new vertical business, it will need to raise a considerable amount of capital to survive or issue new interest-bearing debt. Currently, it has more than $500 million in cash and cash equivalents, and it also raised $1.2 billion in convertible loan notes last year. Therefore, there is no urgency to raise capital for its survival at the moment.

Strong earnings ahead

SoFi is expected to release its fourth quarter results in a few weeks, and all signs point to it maintaining the same momentum as in the third quarter. During the third quarter, the company experienced rapid growth in its membership base of over 96% over the prior year period. The company has achieved four consecutive quarters in which it has seen a 90% growth in its user base. Additionally, it also raised its forecast for the fourth quarter.

The company has grown by leaps and bounds on virtually all of its core metrics. Thanks to its growth on several parameters, its sales have quadrupled compared to 2019 levels. In addition, its adjusted EBITDA has been positive for five quarters. Therefore, with multiple growth drivers, the business is expected to show strong performance for the foreseeable future.

By the way, with the Super Bowl coming up, SoFi will have a chance to earn massive publicity. It holds naming rights worth more than $25 million for SoFi Stadium, which will host multiple games at the event. The Super Bowl attracts over 96 million viewers and is the most popular sporting event in the United States.

The essential

SoFi is arguably one of the hottest fintech stocks with significant multi-bagger prospects. She recently got the bank charter she was looking for, which will separate her from the rest of the pack. Getting involved in banking brings a lot more regulatory oversight and more work for SoFi.

But it also has advantages, because they get a bigger share of each transaction. SoFi plans to offer higher-yielding accounts with competitive interest rates, and CEO Anthony Noto says a national banking charter will allow them to lend at cheaper prices.

Its performance is exceptional and it is likely that it will continue to increase its turnover and results for the foreseeable future.

As of the date of publication, Faizan Farooque had no position (directly or indirectly) in the securities mentioned in this article. The opinions expressed in this article are those of the author, subject to InvestorPlace.com publishing guidelines.

Faizan Farooque is a contributing author for InvestorPlace.com and many other financial sites. Faizan has several years of experience in stock market analysis and was a former data reporter at S&P Global Market Intelligence. You can check out his analysis on InvestorPlace and TipRanks.

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