SoFi Stock Price Up 15% Today – Time to Buy SOFI Stock?

SoFi stock is trading sharply higher in US premarket price action today as investors give a thumbs up to its fourth-quarter earnings release.

SoFi went public earlier last 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.” Currently, SoFi is the best performing stock in the universe of companies that went public through a reverse merger with a Palihapitiya-backed SPAC. Importantly, it is still holding above the SPAC IPO price of $10 even as most de-SPACs, including those that merged with Palihapitiya’s SPAC, trade below the threshold.

However, SOFI stock still trades way below its all-time highs. Other fintech stocks have also tumbled amid the sell-off in growth names. What’s the forecast for the stock and should you buy it in March 2022?

SOFI stock recent developments

SOFI released its fourth-quarter earnings yesterday. It reported adjusted net revenues of $279.8 million in the quarter, which took its annual revenues to just above $1 billion. It was the first time in the company’s history when its adjusted net revenues were above $1 billion. Its revenues increased 54% in the fourth quarter and 63% in the full year 2021.

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Fintech stocks

The fortunes of fintech stocks have been quite mixed this earnings season. While Block stock jumped following the earnings release, PayPal and Affirm stock had cracked. Meanwhile, while almost all the fintech companies are witnessing a growth slowdown, SOFI is still reporting strong sales growth. It especially looks encouraging as several companies that went public through a SPAC reverse merger have had to lower their financial projections. This week only, Lucid Motors and Lordstown Motors slashed their 2022 production guidance.

In its release, SOFI emphasized meeting the milestones. It said, “the best part is that we were able to reach both our adjusted revenue and adjusted EBITDA milestones ahead of plan in an increasingly challenging operating environment, while also significantly exceeding our member growth guidance.”

Notably, the company’s student loan refinancing business has been particularly weak amid the moratorium. As the student loan repayment moratorium is hopefully lifted in May 2022 after multiple extensions, that side of SOFI’s business should also see better days.

SOFI posted better than expected earnings

SOFI reported a per-share loss of 15 cents which was narrower than the 17 cents per share loss that analysts were expecting. The company added 523,000 new members in the quarter which was up 39% from the previous quarter and was a new record. It posted an adjusted EBITDA of $5 million which took its full-year adjusted EBITDA to $30 million. The company has now posted a positive adjusted EBITDA for six consecutive quarters.

Guidance was better than expected

SoFi’s guidance was also better than expected and the company expects to post adjusted net revenues between $280-$285 million in the first quarter. It expects the adjusted EBITDA to be between breakeven to $5 million. Its guidance assumes between $30-$35 million hit from the extension of the student loan moratorium.

SOFI received a bank charter

In January, SOFI received permission to acquire Golden Pacific Bancorp and become a bank holding company. The bank charter is a key growth driver and would help it increase its profitability on a sustainable basis.

Commenting on the bank charter, SOFI said in its release that “Management’s view is that operating as a bank holding company can enhance SoFi’s overall profitability.” It added, “Management believes that moving from a reliance on third-party bank holding companies by operating under a national bank charter will allow SoFi to provide current and prospective members broader and more competitive options across their financial services needs, including deposit accounts and loan products, while lowering the overall cost to fund loans.”

SOFI stock forecast

Wall Street analysts are bullish on SoFi stock. Of the 12 analysts covering SOFI stock, nine rate the stock as a buy while the remaining three have a hold rating. The stock has a median target price of $18 which is a premium of 60% over yesterday’s closing prices. The street high target price is $22, which is a premium of 96%.

While some of the Wall Street analysts have lowered their target prices, most remain bullish on the fintech company. Earlier this month, Bank of America analyst Mihir Bhatia initiated coverage of SoFi with a buy rating and a $17 target price.

Bhatia said, “Customers are exposed to the entire SOFI product ecosystem through an integrated app offering that drives cross-sell and boosts already attractive unit economics. We believe the strategy is still in the early innings and as SOFI attracts more users to its superior technology and robust product set it will deliver attractive revenue and earnings growth.”

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. The bank charter could lead to more upside for the company’s financial projections.

Should you buy SOFI stock?

The fintech industry is among the most promising investing themes for the next decade and SOFI looks like a good play to ride the fintech wave given its diversified operations and a strong management team. The stock looks among the best names to play the fintech story and is a good long-term investment.

Currently, SOFI stock trades at an NTM (next-12 months) EV-to-sales multiple of just above 7x. Loss-making growth names like SOFI have been out of favor with markets amid the rare hike noise. However, once the rate hike narrative settles down, we could see SOFI stock rise higher from these levels.

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