Significant portions of our lives have migrated online over the past few years, and the financial services sector is no exception. Retail banks have gotten the memo, and many have been diligently working to expand their digital presence.
SoFi (NASDAQ:SOFI) turned the model upside down by launching its financial services entirely on the World Wide Web. While the company has enjoyed some successes – and now boasts over 8.8 million members – its journey to increasing share value has been far from straightforward.
SoFi shares reached a record high in February 2021 but have since experienced a significant decline. Moreover, this year has continued the trend, with the company losing 28% of its value in 2024 alone.
Though the stock is struggling, the online bank has had a strong performance this past quarter. It recently announced 643,000 new members, boosting revenues to a new quarterly record and helping the fintech company exceed both top- and bottom-line expectations.
Can the good times translate into rising share prices? Needham analyst Kyle Peterson thinks they will.
“We believe that SOFI’s growing core/member deposit base, ongoing product innovation, and healthy regulatory capital ratios combine to create a compelling investment opportunity for investors looking for exposure to digital lending,” writes the analyst, who notes that the second quarter was the third straight quarter of GAAP profitability.
Furthermore, Peterson cites the improved effectiveness of SoFi’s credit business as a reason for optimism.
“Credit metrics are healthy compared to past higher-loss vintages,” writes the analyst, as “stronger lending-related revenue helped offset softer results in the tech products/solutions segment.”
On that note, despite acknowledging weaker tech product numbers, Peterson is comfortable with SoFi management’s assurances of both a strong pipeline as well as “longer sales cycles as SOFI moves up market.”
All in all, Peterson believes that SoFi is “well-positioned to outperform over the next 12 months.” The analyst rates the stock a Buy and sets a 12-month price target of $10, projecting a potential gain of 40%. (To watch Peterson’s track record, click here)
On Wall Street, the view is a bit less rosy. Among 16 analyst ratings over the past three months, there are 4 Buy, 9 Hold, and 3 Sell ratings, all coalescing to a Hold (i.e. Neutral) consensus rating. However, the average 12-month price target of $8.15 still represents a gain of ~14%, so even the less optimistic analysts expect some positive movement. (See SOFI stock forecast)
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Disclaimer: The opinions expressed in this article are solely those of the featured analyst. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
