Where will SoFi stock be in one year?

There aren’t too many deals on the market right now. Technology stocks with enormous potential trade at high multiples, and investors have to wonder if these stocks are worth the prices they are currently asking. At the same time, there are many value stocks that trade at low prices but have low growth potential.

Smart investors look for rare opportunities when high-growth stocks are trading at bargain prices. These companies often come with greater risks, but sometimes the rewards are enormous.

Maybe that’s why I’m becoming more and more curious. sophie technology (Sophie -0.43%) The stock continues to fall as it reports increasingly impressive earnings. Fintech stocks are showing solid growth, trading at low earnings multiples, and taking on less risk each time they beat expectations.

Are the markets completely missing the mark here? Let’s take a look at where SoFi will be in a year’s time, and whether this is a viable deal or not.

Another amazing quarter

SoFi is a fully digital bank targeting college graduates and young professionals. It offers a full suite of financial services in its app, including bank accounts, investment tools, loans, and more. We’re a modern bank, attracting hundreds of thousands of new accounts every quarter thanks to our easy-to-use services and low fees. This accelerated the pace of growth, safely achieved profitability, and delivered a dynamite first quarter of 2024.

In the first quarter of 2024, we added 622,000 new accounts, a 35% increase over last year, and revenue increased 37% year over year. This was the second consecutive quarter of positive net income, totaling $88 million on a generally accepted accounting principles (GAAP) basis. This figure is well above the projected $20 million. Diluted earnings per share were $0.02, which does not include one-time gains related to the exchange of convertible notes.

In addition to new customers, SoFi’s growth comes from its Financial Services Productivity Loop strategy, which leverages the platform’s many services to generate higher engagement across the platform. SoFi added approximately 990,000 new products to its platform in the first quarter, a 38% increase over last year.

Things can get a lot better

A year from now, all of these numbers will likely be much higher. SoFi’s platform is resonating with its core customers and many others. This offers the future of banking with all your financial services in one mobile app, and it’s likely that more people will continue to make the switch. While all banks are going digital, SoFi has several advantages over its competitors.

One is the first-mover advantage, which gives us a strong brand presence as a digital bank. Moreover, because it was created as a digital app for the general public, it was built to be functional and nimble from the start, appealing to younger users. Finally, through our roots as a student loan cooperative, we have developed relationships with a core group of upwardly mobile professionals who will grow together.

SoFi is expanding its core lending business, and this diversification has been key to its recent growth. But even the lending business is rebounding, showing two trends. One is that the student loan moratorium ended last October, and the other is that interest rates, while still high, may have reached a plateau, even if they do not fall as quickly as economists expected.

According to the company’s outlook, total adjusted net income in 2024 is expected to increase 15% to approximately $2.4 billion and net income to approximately $170 million. Both of these have been raised since the last update.

What’s wrong with Wall Street?

Despite the strong performance, SoFi shares plunged 10% after the company released the report. Wall Street didn’t like the expected slowdown in revenue growth in the second quarter (about $560 million, below expectations of $581 million) or net income guidance of about $7.5 million (lower than the average forecast of $13 million). .

If Q2 is anything like Q1, SoFi will blow these predictions out of the water. Either way, investors should focus on long-term trends, not short-term performance, and certainly not lose sight of analysts’ expectations. I don’t want to say they don’t matter at all. Investors should always make decisions based on all the information they can find, and leveraging Wall Street analytics completes the picture. But they certainly don’t come close to giving the full picture.

Another way this analysis impacts investors is that it has created an incredible opportunity for investors to buy SoFi at an attractive valuation of 3x trailing 12-month revenue and 37x forward one-year earnings. Investors should not be discouraged. A year from now, SoFi should grow as planned, and prices will likely catch up.