SoFi Technologies (NASDAQ:SOFI) excels as a fintech growth stock by offering cost-effective digital financial services. The SOFI stock initially specialized in refinancing student loans but expanded into three segments: lending (student, personal, and home loans), financial services, and a technology platform.
The company’s market cap increased from $4.1 billion in October 2022 to $7 billion in 2023 due to its evolution into a digital banking hub with user-friendly features. SoFi’s appeal lies in its modern convenience, low fees, and high-interest savings accounts, catering to younger generations. This is why there’s continued bullish sentiment on this fintech stock.
Here’s more on why I think SoFi is an intriguing fintech stock to own at current levels.
Q3 Earnings Report
On October 30, 2023, SoFi posted its Q3 2023 earnings, delivering robust results. The report highlighted a 27% year-over-year surge in GAAP Net Revenue and Adjusted Net Revenue, totaling $537 million and $531 million, respectively. Additionally, the company achieved a record Adjusted EBITDA of $98 million, marking a substantial 121% year-over-year increase.
SoFi exceeded expectations in Q3 with an adjusted loss of 3 cents per share, beating the anticipated 8 cents loss. Their adjusted net revenue reached $530.72 million, surpassing the expected $511 million. The management anticipates reporting a net profit in the current quarter.
The growth in adjusted net revenue was notably driven by non-lending businesses, particularly the technology platform and financial services segments. In addition, the financial services segment achieved positive contribution profit for the first time, contributing to overall profitability.
During Q3, the technology platform achieved a contribution profit of $32.19 million, a substantial increase from $19.54 million in the same quarter last year. The financial services segment earned $3.26 million, a significant improvement from a loss of $52.62 million a year earlier. Student loan originations exceeded expectations, reaching $919.3 million, as borrowers geared up to restart loan payments in October.
SOFI Goes Beyond Student Loans
SoFi initially gained prominence in student loan refinancing. The anticipation was that the return of student loan payments would revive this segment. While some analysts viewed this as a positive catalyst, others, including Truist’s Andrew Jeffrey (who is bullish on SOFI stock), believed its impact on future results might be less than anticipated.
The market’s cautious stance aligns with recent macroeconomic uncertainties. It’s worth noting that SoFi has evolved beyond student loan refinancing, now functioning as a fintech and neo-bank, essentially a digital-first financial hub. This transformation may be overlooked by investors but could soon gain significant attention.
SoFi transitioned from student loans to offer a range of financial products. It competed with digital and traditional banks but enjoyed rapid growth, attracting 584,000 new customers in Q3, totaling 6.2 million, a 44% year-over-year increase. It’s become a comprehensive financial platform, driving financial success. In Q2 2023, SoFi’s bank was profitable, and GAAP profitability was a year-end goal.
Buy SOFI Now
SoFi’s Q3 report showed a 27% revenue growth, somewhat slower than member expansion, suggesting cautious adoption. Losses increased despite member growth.
Moreover, SoFi anticipates a turnaround from its loss-making phase, projecting positive GAAP profits in Q4 2023, boosted by rising members, deposits, revenue, and an expanding net interest margin of 6%.
Wall Street projects a promising path for SoFi, expecting the company to profit in Q4 and achieve its first annual profit in 2024, with substantial growth in 2025. While SoFi may appear less attractive as an unprofitable stock, its potential to deliver on this promise could significantly change the outlook for investors.
On the date of publication, Chris MacDonald did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.