SoFi Stock Price Forecast November 2021 – Time to Buy SOFI Stock?

Social Finance or SoFi (SOFI) stock is trading sharply higher today after reporting its third-quarter earnings. The stock is trading at a premium of over 100% from the SPAC IPO price and looks set to continue the good run further.

SoFi went public earlier this year through a reverse with Social Capital Hedosophia Holdings IV (IPOE). The SPAC was sponsored by Chamath Palihapitiya, who has earned his reputation as the “king of SPACs.” Meanwhile, SoFi is currently the best performing stock in the universe of companies that went public through a reverse merger with a Palihapitiya-backed SPAC.

All the companies that went public through a merger with a Palihapitiya SPAC trade above the SPAC IPO price of $10, barring Clover Health. Meanwhile, SoFi stock still trades below the highs that it hit during the Reddit frenzy. What’s the forecast for the stock and is it a good buy in November?

SoFi released third-quarter earnings

SoFi reported total revenues of $272 million in the third quarter, which was 35% higher than the corresponding quarter last year. The company posted an adjusted EBITDA of $10.2 million in the quarter, which was its fifth consecutive quarter with a positive EBITDA. It was a record quarter for SoFi in terms of revenues but its adjusted EBITDA was lower as compared to the third quarter of 2020.

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The growth outlook is strong

The company added 377,000 new members in the quarter which was the second-highest quarterly member growth in its history. While a lot of growth names have been witnessing a slowdown, SoFi’s growth outlook has been largely intact. If anything, the lifting of the moratorium on student loans would help it increase the revenues even further.

Expressing optimism over the results, Anthony Noto, SOFI’s CFO said “Our strategy to build the first digital one-stop shop that meets our members’ financial needs for every major event in their lives, and all of the days in between, continues to pay off.”

He added, “Through successful execution, we’ve grown, broadened, and diversified our three business segments, resulting in another quarter of record revenue and a fifth consecutive quarter of positive EBITDA.”

SoFi earnings: Key metrics

One of the key USP of SoFi’s fintech platform is the massive cross-sell opportunities. During the third quarter, SoFi witnessed an all-time high cross-buying of products by existing customers. It said that SoFi Money, SoFi Invest, and SoFi Credit Card were responsible for 73% of cross-buying opportunities.

The company saw an 18% increase in member growth from referrals in the quarter as compared to 3% in the previous quarter. It originated $1.6 billion worth of personal loans in the quarter which was again an all-time high. The company managed to achieve the 166% YoY growth without comprising on credit quality and its average FICO score was 749 in the quarter, which was near all-time highs.

The guidance also looked strong

SoFi expects its adjusted revenues between $272-$282 million in the fourth quarter, which would mean a YoY growth between 49-55%. It expects its adjusted EBITDA to be between $2-$5 million. The company expects to exceed the 2021 guidance that it had previously provided. Notably, markets have been wary of the projections that SPACs provide during the merger as several of them, including Clover Health, have had to lower the projections.

However, SoFi exceeding the projections is a positive sign and markets are unsurprisingly sending the shares north today.

SoFi stock forecast

Wall Street analysts are bullish on SoFi stock. Of the seven analysts polled by CNN Business, five rate the stock as a buy while the remaining two have a hold rating. The stock has a median target price of $27 which is a premium of 32.5% over yesterday’s closing prices. The street high target price is $30, which is a premium of 47%.

Last month, Morgan Stanley initiated coverage on SoFi stock with an overweight rating and a $25 target price. Analyst Betsy Graseck said “Student loan refinancing has been on ice since the US government administration put federal student loans into deferment in March 2020. Why refi into a lower rate when you don’t have to pay anything at all during deferment and just accrue interest on your federal loan? In February 2022 this all changes.”

The brokerage is also bullish on the stock in anticipation of the bank charter. After the bank charter, SoFi would not have to rely on third-party banks for lending products. Also, it would support the company’s earnings as well as valuations.

SOFI stock long term forecast

SoFi’s long-term forecast looks positive as fintech companies continue to snatch market share from traditional banks. The company is a financial services powerhouse having multiple products under its fold.

SoFi’s top line is growing at a fast pace and it expects its revenues to increase 43% annually between 2020 and 2025. The company expects its revenues to rise to $3.67 billion by 2025 and is forecasting EBITDA margins at 32% that year. A possible bank charter will mean further upside for these estimates. Also, SOFI might diversify into new businesses.

Valuation and technical analysis

SoFi stock looks bullish on the charts and trades above the 50-day, 100-day, and 200-day SMA (simple moving average). The stock trades at an NTM price-to-sales multiple of 12.3x, which seems reasonable looking at the valuations of other fintech names.

The fintech industry is among the most promising investing themes for the next decade and SOFI looks a good play to ride the fintech wave given its diversified operations and a strong management team.

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