SOFI - SoFi stock forecast: short-term turbulence uptrend is intact
2024-01-03 09:36:00 ET
SoFi (NASDAQ: SOFI) stock price retreated sharply on Wednesday as American equities continued their slump. The stock crashed by more than 4% after receiving a downgrade from an analyst at Keefe Bruyette. He slimmed the stock target from $7.50 to $6.50 citing growth concerns.
Long-term outlook
SoFi has been one of the fastest-growing companies in the financial services industry, helped by its diversified business strategy. It operates a financial ‘supermarket’ that offers numerous solutions like loans, insurance, investing and trading, and other banking solutions.
A closer look at its internal metrics shows that the company has been growing at one of the fastest paces. Its members have jumped from 1.08 million in Q1’20 to over 6.2 million today.
At the same time, users of its lending products has jumped from 842k to over 1.59 million while financial services users gas risen from 606k to over 8.8 million in the same period. Its revenue has also grown. It generated over $531 million in quarterly revenue in the last quarter, up from $419 million in the same quarter in 2022.
SoFi’s revenue growth has been growing rapidly as well. Its total revenue jumped from just $269 million in 2018 to over $1.9 billion in the past four quarters. Analysts expect its revenue to hit $2.06 billion in 2023 and $2.5 billion this year.
Other parts are doing well as the total interest income jumped to $773 million in 2022 from $363 million in 2020. This growth happened as the company saw more demand for its personal loan solutions.
Meanwhile, the company’s full picture is also doing well. While it is still making losses, this is due to its investment in growth. It also provides substantial stock-based compensation to its employees. Also, while the company is still generating negative FCF when you adjust it for working capital, it is cash flow positive.
Most importantly, its EBITDA has been quite positive. It has jumped from minus $64 million in 2022 to over $252 million. This is a sign that the company has room to improve its profitability in the coming years.
Therefore, while the company has some challenges, especially on how to translate its revenue and growth into tangible profits. Nonetheless, I believe that the management is doing everything right. Analysts expect the first annual profit this year.
SoFi stock price outlook
Analysts have mixed opinions about SoFi share price. The most optimistic are from Truist Financial, who believes that the shares could jump to $14. Citigroup analysts also see it rising to about $11 in the coming months. On the other hand, those at Piper Sandler, Barclays, and Wedbush see the stock falling to as low as $3.
My target for the SoFi stock price is quite bullish, thanks to its remarkable growth as it positions itself as a major player in the financial industry. This trend could see it rise and retest the important resistance at $11.71, the highest point on July 31st. If this happens, it means that the stock will rise by 31% from its Wednesday’s open.
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