SOFI Stock (NASDAQ:SOFI) Q3 Earnings This Week – Is it a Buy?

In all likelihood, SoFi (NASDAQ:SOFI) should post an earnings surprise in the third quarter, when it reports on November 1st. The need for personal loans continues to rise, especially during tough economic times when people typically require additional funds. Credit card companies are getting more aggressive with their rates, so people have turned to personal loans instead. SoFi has been able to tap into this trend, as it offers both consumer financial services and loans. The future is looking bright for the firm. Hence, we are bullish on SOFI stock.

Investors are hopeful that strong bank earnings point towards the economy's resiliency. Investor optimism has been on a high of late, with most reacting positively to recent financial results from leading banks. This is great news for SOFI investors, who will have hoped that strong bank earnings would indicate that the financial sector is on the comeback trail.

SoFi's stock has fallen over 65% year-to-date, but it might be due for a recovery soon. There are only two months left this year, and if it can dish out an earnings surprise, we could see its price rise again. It trades at a beta of roughly 2.0, which suggests that it is twice as volatile as the broader market. Therefore, investing in it comes with a fair share of risk.

However, it presents itself as an excellent wager ahead of earnings. It currently trades at roughly 3.5 times forward sales, which is significantly lower compared to a few months ago.

SoFi Taps the Growing Demand for Personal Loans

The financial services offered by SoFi are designed to help consumers with their everyday needs. The company has gained millions of customers through high-yield checking and savings accounts, credit cards, brokerage services, and more. In addition, it offers loan products that can be approved quicker and at more favorable rates thanks to its massive database. Essentially, SoFi is a financial one-stop shop.

In the past few quarters, the company has exceeded expectations. With its third-quarter results coming up, it's plausible to assume another solid showing on the back of a robust personal loan trend that continues to grow steadily. SoFi's expansion into new markets and its ability to provide a personalized service will make it easier to reach new customers.

Moreover, the company's strong balance sheet is a major plus for the firm. It holds a whopping $707 million in cash, which gives it plenty of wiggle room to continue expanding its business at a robust pace for the foreseeable future. What's more heartening is that its losses have been improving significantly.

It reported a loss of $0.26 per share in the second quarter of 2021, which improved by 53.8% in the second quarter of this year to a loss of $0.12 per share. It's possible that earnings could turn positive by next year. Also, SoFi ended the quarter with 4.3 million members, a 69% improvement from the same period last year.

Therefore, we are incredibly positive about the company's future growth and success. Its losses are unlikely to impede its plans in the future, and with student loan originations improving drastically next year, SOFI stock could rebound emphatically.

What is the Price Target for SoFi Stock?

Turning to Wall Street, SOFI stock maintains a Moderate Buy consensus rating based on six Buys, three Holds, and zero Sells assigned over the past three months. The average SOFI price target is $8.25, implying 51.38% upside potential. Analyst price targets range from a low of $7 per share to a high of $10 per share.

Conclusion: SOFI Stock is Likely to Beat Earnings

The company is expected to report its third-quarter results soon, and investors will better understand where it stands. In all likelihood, though, it should post another solid beat across both its top and bottom lines.

The rise in personal loans is fueled by consumers seeking debt consolidation and easily accessible funds. SoFi has capitalized on this opportunity by increasing its origination rate faster than its peers.

Stocks have been on an upward trend following recent bank earnings, but investors should also prepare for more volatility. The Federal Reserve will raise interest rates at its upcoming meetings over the next couple of months as inflation remains incredibly high.

Therefore, volatility is a given in the current market scenario. However, it doesn't take away from SoFi's quality and a long-term bull case. Investors should look towards the long term and pick up the stock while it trades near its 52-week low.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


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