SoFi Technologies (SOFI 3.14%) is gaining momentum, recently reaching $10 per share, its highest since early 2022. However, it’s still down about 60% from its peak in 2021. SoFi is a digital bank with a tech twist.
1. Growing Popularity
SoFi offers banking and financial services through its website and app, with no physical branches. Since 2020, its customer base has surged from 1.4 million to nearly 8.8 million, growing 41% year-over-year in Q2. It’s especially popular with young, high-earning adults, a key demographic for future economic growth.
2. A Tech-Focused Business
SoFi acquired Galileo, a fintech company that handles payment processing and card issuing for over 100 clients globally. Galileo’s growth has been significant, and it could enhance SoFi’s overall business and exposure to the fintech market.
3. Potential in Student Loans
SoFi started with student loans but faced challenges due to a federal freeze on these loans. However, as the freeze ends and interest rates stabilize, the private student loan market could see 10% annual growth, benefiting SoFi’s business.
4. New Revenue Streams
SoFi is shifting towards fee-based revenue rather than traditional lending. Recently, it secured a $2 billion agreement to expand its personal lending, allowing it to reduce risk while generating fees rather than relying solely on interest income.
5. Strong Earnings Growth Ahead
SoFi has reported profits for three consecutive quarters, with analysts predicting average earnings growth of 51% annually for the next few years. Given its popularity and growth potential, the stock may perform well as earnings increase over time.
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