SoFi Technologies (NASDAQ: SOFI) is known for tackling the financial services industry with a user-friendly focus. And it does a great job of winning customers.
But for such an innovative company this is fintech stocks has been a huge disappointment. It is down 33% in 2024 (as of August 2) and is currently trading 74% below its February 2021 high.
Maybe now is a good time to buy SoFi stock during the dip. But is this stock a millionaire maker?
Disrupting financial services
What SoFi has accomplished in the 13 years since its founding is commendable. The company is disrupting financial services with its digital offerings, and offering its customers a better user experience than traditional banks are known for. Through SoFi’s mobile app, it is possible to open a checking or savings account, invest in stocks or cryptocurrencies, and get a personal loan.
The strategy is simple. SoFi’s management team is focused on introducing new products and services while targeting younger, more affluent consumers. What started as a student loan refinancing operation is now a respected banking entity.
Granted, growth has slowed. The days of 50% or more annual revenue growth are over. However, SoFi continues to grow at a healthy pace, which is even more impressive given the uncertain economic environment the U.S. finds itself in.
In the second quarter, the company posted revenue of $599 million, up 20% year over year. That was led by SoFi adding 643,000 new customers (which it calls members), bringing its total to nearly 8.8 million.
It’s anyone’s guess what SoFi’s total addressable market is. But the domestic banking sector is truly enormous. CEO Anthony Noto has said he wants it to one day become a top 10 financial institution.
SoFi’s Earnings Potential
The typical playbook for many growth tech companies is to invest all of their resources in attracting customers by pouring money into product development and marketing efforts. To be clear, SoFi has historically adopted this strategy. But now it’s starting to pay off.
That’s because the company is now profitable. In fact, the company’s $17 million Q2 net income was the third consecutive quarter with a positive result.
SoFi has no physical bank branches. This digital-first approach should theoretically result in a scalable business model. A largely fixed cost structure can lead to profitability once a certain level of revenue is reached. It appears that SoFi has passed this point. Of course, the company will continue to invest in marketing and product development, but these investments are now being capitalized on increased revenue and customer base.
Executives believe the future looks very bright. They raised their full-year forecast, now predicting net income of between $175 million and $185 million. And in 2026, SoFi is expected to report earnings per share of $0.68 (at the midpoint), with annual growth of 20% to 25% thereafter. It’s hard not to feel optimistic when you think about these targets.
Joining the Seven-Figure Club
Based on the growth numbers, coupled with the beginning of what appears to be consistent profit generation, SoFi appears to be a solid company that should be on investors’ radar. But can the stock make you a millionaire?
Because SoFi shares have underperformed, they are trading at a reasonable price price-sales ratio of 2.9. This is well below the historical average and offers potential for an increase if the market were to value the shares higher.
If you are bullish on SoFi, it makes sense to buy shares with the intention of holding for several years. Those who can not only invest more capital up front, but also extend their time horizon, have a better chance of becoming millionaires.
Should You Invest $1,000 In SoFi Technologies Now?
Before buying shares in SoFi Technologies, you should consider the following:
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Neil Patel and his clients have no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
Is SoFi a Millionaire Maker? was originally published by The Motley Fool
