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SoFi Technologies Slips 30% YTD: Is the Stock Worth Buying?
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SoFi Technologies’ (SOFI - Free Report) stock has declined 29.5% in the year-to-date period against the 13.3% rally of the industry it belongs to and 14.5% growth of the Zacks S&P 500 composite.
YTD Price Performance
Image Source: Zacks Investment Research
The company’s fall is comparable with the performance of its competitors Edenred SE (EDNMY - Free Report) , which has lost 31.6%, and TTEC Holdings, Inc. (TTEC - Free Report) , which has plunged 79.3% over the same period.
The SOFI stock has gained 8.2% over the past month, suggesting a reversal or a halt in the correction phase.
As of the last trading session, SoFi Technologies’ stock price closed at $7.01, which was 49.6% below its 52-week high of $10.49. Also, it is trading below its 50-day moving average, suggesting a bearish sentiment among investors.
Given the recent weakness in SOFI, investors might be tempted to buy its shares. But is this the right time to purchase SoFi Technologies’ stock? Let us find out.
Rising Refinancing Demand to Aid SOFI
The market is anticipating a federal fund rate cut during the Federal Open Market Committee’s September meeting due to the weakening labor market and slowing inflation rate. It will, thus, result in continuous rate cuts across 2024. The trend is also expected to continue in 2025. As a result, we hope that SoFi Technologies will observe a rise in refinancing demand.
Consumers will witness a decline in borrowing costs post-federal funds rate cut. Consumers who had taken out loans when student loans, personal loans and mortgage interest rates were high will find firms like SOFI to refinance their loans to a lower interest rate. This strengthens SoFi Technologies’ growth prospects.
SOFI’s Cross-selling Potential Looks Promising
SoFi Technologies’ second-quarter 2024 earnings release revealed that it witnessed 643,000 member additions, which is massive. Products sold to such a vast customer base create a solid foundation for capitalizing on cross-selling opportunities. SoFi Technologies has added 946,000 products, marking a 36% rise from the preceding quarter. The increase in total products is observed in both lending and financial services products. Such results show management’s efforts to make SOFI a “one-stop-shop” for its members.
Management has also highlighted innovation endeavors and a pipeline of new products. Such actions fit well with its commitment to enhance SOFI’s value proposition, which is the primary driver to continue expanding the company’s cross-selling potential. We anticipate the maximization of cross-selling potential to be instrumental in creating long-term value for shareholders.
SOFI’s Stock Valuation: Room for Growth
If we look at the Price/Earnings (PE) ratio, SoFi Technologies’ shares trade at 33.72X forward earnings at present compared with the industry’s 32.4X. Despite the PE being a bit higher than the industry, it might not be a major red flag considering SOFI’s growth outlook. Investors often find companies with solid growth prospects appealing and are willing to pay a premium for such stocks.
Image Source: Zacks Investment Research
Moving on to EV-to-EBITDA, SOFI is trading at 9.67X, lower than the industry’s 47.11X. Investors are inclined to get invested in a discounted stock as such.
Image Source: Zacks Investment Research
SoFi Technologies’ Strong Top & Bottom-line Prospects
The Zacks Consensus Estimate for SOFI’s 2024 sales stands at $2.5 billion, indicating year-over-year growth of 18.6%. Revenues for 2025 are anticipated to grow 14.2% year over year.
The consensus mark for the company’s 2024 earnings stands at 9 cents per share, increasing from the loss of 36 cents per share reported in 2023. For 2025, the bottom line is estimated to rise more than 100% on a year-over-year basis.
SOFI's Northward Estimate Revisions
Five estimates for 2024 have moved north in the past 60 days versus no southward revision, reflecting analysts’ confidence in the company. The Zacks Consensus Estimate for 2024 earnings has moved up 12.5% in the past 60 days.
SoFi Technologies: A Must Buy
SOFI is expected to grow from the rise in refinancing demand, driven by lower interest rates. The company’s cross-selling opportunities, led by customer base and product expansion, are other tailwinds. Despite the PE being premium to a minor degree compared with the industry, it is justified by SoFi Technologies' growth prospects. The upward estimates reflect analysts’ optimism.
The above-discussed factors make SOFI an appealing investment opportunity.
SoFi Technologies’ recent performance shows a reversal in the stock performance, signaling the end of the correction phase. The combination of the trend reversal and underlying strengths favors investors to buy SOFI stock at the current level.
Image: Bigstock
SoFi Technologies Slips 30% YTD: Is the Stock Worth Buying?
SoFi Technologies’ (SOFI - Free Report) stock has declined 29.5% in the year-to-date period against the 13.3% rally of the industry it belongs to and 14.5% growth of the Zacks S&P 500 composite.
YTD Price Performance
The company’s fall is comparable with the performance of its competitors Edenred SE (EDNMY - Free Report) , which has lost 31.6%, and TTEC Holdings, Inc. (TTEC - Free Report) , which has plunged 79.3% over the same period.
The SOFI stock has gained 8.2% over the past month, suggesting a reversal or a halt in the correction phase.
As of the last trading session, SoFi Technologies’ stock price closed at $7.01, which was 49.6% below its 52-week high of $10.49. Also, it is trading below its 50-day moving average, suggesting a bearish sentiment among investors.
Given the recent weakness in SOFI, investors might be tempted to buy its shares. But is this the right time to purchase SoFi Technologies’ stock? Let us find out.
Rising Refinancing Demand to Aid SOFI
The market is anticipating a federal fund rate cut during the Federal Open Market Committee’s September meeting due to the weakening labor market and slowing inflation rate. It will, thus, result in continuous rate cuts across 2024. The trend is also expected to continue in 2025. As a result, we hope that SoFi Technologies will observe a rise in refinancing demand.
Consumers will witness a decline in borrowing costs post-federal funds rate cut. Consumers who had taken out loans when student loans, personal loans and mortgage interest rates were high will find firms like SOFI to refinance their loans to a lower interest rate. This strengthens SoFi Technologies’ growth prospects.
SOFI’s Cross-selling Potential Looks Promising
SoFi Technologies’ second-quarter 2024 earnings release revealed that it witnessed 643,000 member additions, which is massive. Products sold to such a vast customer base create a solid foundation for capitalizing on cross-selling opportunities. SoFi Technologies has added 946,000 products, marking a 36% rise from the preceding quarter. The increase in total products is observed in both lending and financial services products. Such results show management’s efforts to make SOFI a “one-stop-shop” for its members.
Management has also highlighted innovation endeavors and a pipeline of new products. Such actions fit well with its commitment to enhance SOFI’s value proposition, which is the primary driver to continue expanding the company’s cross-selling potential. We anticipate the maximization of cross-selling potential to be instrumental in creating long-term value for shareholders.
SOFI’s Stock Valuation: Room for Growth
If we look at the Price/Earnings (PE) ratio, SoFi Technologies’ shares trade at 33.72X forward earnings at present compared with the industry’s 32.4X. Despite the PE being a bit higher than the industry, it might not be a major red flag considering SOFI’s growth outlook. Investors often find companies with solid growth prospects appealing and are willing to pay a premium for such stocks.
Moving on to EV-to-EBITDA, SOFI is trading at 9.67X, lower than the industry’s 47.11X. Investors are inclined to get invested in a discounted stock as such.
SoFi Technologies’ Strong Top & Bottom-line Prospects
The Zacks Consensus Estimate for SOFI’s 2024 sales stands at $2.5 billion, indicating year-over-year growth of 18.6%. Revenues for 2025 are anticipated to grow 14.2% year over year.
The consensus mark for the company’s 2024 earnings stands at 9 cents per share, increasing from the loss of 36 cents per share reported in 2023. For 2025, the bottom line is estimated to rise more than 100% on a year-over-year basis.
SOFI's Northward Estimate Revisions
Five estimates for 2024 have moved north in the past 60 days versus no southward revision, reflecting analysts’ confidence in the company. The Zacks Consensus Estimate for 2024 earnings has moved up 12.5% in the past 60 days.
SoFi Technologies: A Must Buy
SOFI is expected to grow from the rise in refinancing demand, driven by lower interest rates. The company’s cross-selling opportunities, led by customer base and product expansion, are other tailwinds. Despite the PE being premium to a minor degree compared with the industry, it is justified by SoFi Technologies' growth prospects. The upward estimates reflect analysts’ optimism.
The above-discussed factors make SOFI an appealing investment opportunity.
SoFi Technologies’ recent performance shows a reversal in the stock performance, signaling the end of the correction phase. The combination of the trend reversal and underlying strengths favors investors to buy SOFI stock at the current level.
SOFI presently has a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 (Strong Buy) Rank stocks here.