Friday, February 23, 2024
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So Far, So Good for SOFI Stock After First-Ever Profit

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Online financial services company SoFi Technologies (NASDAQ:SOFI) might be turning a corner. SoFi finally reported actual earnings… and not a loss, news that sent its struggling stock surging Monday.

Shares of SoFi skyrocketed nearly 20% after the company said that it posted a net profit of nearly $48 million, or 2 cents a share, for the fourth quarter. Revenue surged 35% to about $615 million. Wall Street analysts were expecting a loss of 1 cent a share and revenue of about $572 million.

The numbers form SoFi across the board were solid. The company ended the year with more than 7.5 million members, an increase of 44% from the end of 2022. Loan originations were up 45% in the quarter, thanks primarily to big jumps in student loan and home loan volume. And total deposits more than doubled from the fourth quarter of 2022, to end 2023 at $18.6 billion.

So, is the worst over for SoFi? The stock is still down about 10% so far in 2024…even after Monday’s surge. And trading at just under $9, shares have tumbled sharply from the all-time high of just under $25 that they hit shortly after SoFi went public in June 2021 via a blank-check merger with a special purpose acquisition company, or SPAC. (Remember when they were all the rage?)

Analysts remain skeptical. The consensus price target for SoFi is just $9.33, slightly higher than its current price following Monday’s pop. What’s more, there are only five “buy” recommendations on Wall Street, versus seven “holds” and three “sell” ratings.

But those price targets could climb higher now that SoFi has posted a profit since analysts will presumably need to raise their earnings forecasts for 2024 following Monday’s good news. Wall Street is currently predicting that SoFi will earn 5 cents a share for 2024.

SoFi has also been busy broadening out its product offerings as it attempts to become a one-stop financial services shop for consumers and individual investors.

To that end, SoFi also announced Monday that it will begin to offer alternative investments from the likes of Cathie Wood’s ARK Invest, private equity giant The Carlyle Group, KKR and Franklin Templeton to SoFi Invest customers, as well as more than 6,000 mutual funds.

“We know investing is critical to building wealth, but many investment vehicles are still not accessible to everyday investors,” said SoFi CEO Anthony Noto, who was previously an analyst and investment banker at Goldman Sachs (NYSE:GS) and has also held senior management roles at X and the National Football League.

“Introducing access to alternative investments continues our focus of offering access to investments that are usually reserved for the ultra wealthy, and allows us to provide our members with even more choice and flexibility when it comes to investing their hard-earned money,” Noto added.

SoFi is trying to become a bigger player in the business of initial public offerings too. SoFi was one of the underwriters for last year’s IPO of popular grocery delivery service Instacart (NASDAQ:CART). Now it’s hoping that it can link up with other private companies looking to make their debuts on Wall Street.

The Bottom Line

To be sure, SoFi faces an uphill battle against the traditional titans of Wall Street. It also faces tough competition from other upstarts, including Upstart Holdings (NASDAQ:UPST) and Robinhood Markets (NASDAQ:HOOD).

SoFi also recently made the decision to end its crypto trading services due to pressure from regulators. That’s because SoFi, unlike some other fintechs, has a federal bank charter. So SoFi might miss a new boom in Bitcoin (BTC-USD) now that spot ETFs have been launched. But as Noto continues to steer SoFi into more lucrative parts of the world of banking, investors might reap the benefits.

As of this writing, Paul R. La Monica did not hold (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.

Paul R. La Monica is a veteran financial journalist with nearly 30 years experience (including more than 20 at CNN) covering the stock market and other asset classes, the economy and other corporate and business news.

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