SoFi Technologies: Should You Invest or Pass?
SoFi Soaring, but Still Undervalued?
Strap in, investors, as SoFi Technologies (SOFI) has been a rollercoaster ride lately. Despite a 106% surge in the past five months, shares are still 44% below their peak. But with lower interest rates potentially fueling growth, is it time to buy, sell, or hold this fintech titan?
Massive Aspirations
SoFi's strength lies in its digital platform and exceptional user experience. The company offers a range of financial services, aiming to be a one-stop-shop for all your financial needs. CEO Anthony Noto, known for his ambitious nature, declared, "Our aim is to become a top 10 financial institution. It's not a question of if, but when"[1].
That's a bold target, considering that the 10th largest U.S. bank, Toronto-Dominion Bank, boasts $400 billion in assets[1]. SoFi's assets, however, lag significantly behind at $34 billion as of Sept. 30[1]. But the growth trajectory is nothing short of impressive.
In Q3, SoFi added 35% more customers to its 9.4 million user base, the highest in any three-month period[1]. Revenue surged 30%, driven by its expand-and-conquer strategy. Customers might start with a high-yield savings account, then gradually sign up for credit cards or mortgages to deepen their relationship with SoFi[1].
Financially, SoFi has made remarkable progress. The company has reported four consecutive quarters of positive earnings per share (EPS)[1]. This signifies the benefits of scale and the company's ability to grow at a remarkable pace while controlling costs.
Not a Bargain Anymore?
At a current price-to-sales (P/S) ratio of 6.1, SoFi's shares are well above their historical average of 4.2[2]. In fact, they're more expensive now than they were three months ago, indicating a positive market sentiment[2].
Considering SoFi's profits, we can also analyze its forward price-to-earnings (P/E) ratio. Management projects EPS of $0.68 (at the midpoint) in 2026, with the stock currently trading at a P/E ratio of over 21[2].
While SoFi's stock is no longer a bargain, the company's fundamentals are strong. Its growing customer base, revenue, and profits suggest a promising future. So, what's the best move for investors?
From a fundamental perspective, SoFi's business is thriving. If you're still bullish, maybe the best approach is to hold onto your shares to capitalize on SoFi's potential success in the future.
But remember, as with any investment, diversification is key, and research is crucial. Don't invest more than you can afford to lose, and always consider seeking advice from a financial advisor before making any investment decisions.
Analysts' Perspective
Analysts' recommendations for SoFi Technologies are mixed, leaning towards a hold. The average consensus price target is $11.71, representing a projected downturn of 35.06% from the current price[3]. Some analysts have upgraded their price targets, while others have maintained underperform ratings with higher price targets[3].
Given the mixed signals, holding the stock could be a wise choice while awaiting further developments. As always, it's essential to do your own research and make informed decisions based on your own risk tolerance and investment goals.
Despite SoFi's ambitious aim to become a top 10 financial institution, its assets still lag significantly behind those of larger institutions. To continue its growth, investors might consider investing money in SoFi, given its increasing number of customers and surging revenue. However, with SoFi's shares currently trading at a higher price-to-sales ratio than before, one should proceed with caution and consider the company's strong fundamentals and future prospects before making any investment decisions.
