Non-traditional banking: SoFi stock forecast

In 2023 “banking sector” is the perfect phrase to trigger panic in the stock market or at least to bring a week full of nightmares for investors. At the same time, stock of online bank SoFi has already grown by 17% since the beginning of the year. So, what does it mean except that cool banks don’t look at explosions? Let’s find out what SoFi is and why the company might deserve attention.

SoFi, or Social Finance, was founded in 2011 and started as a company that issued students more affordable education loans than other credit organizations. Later, loans were not limited to students. The business was developing, went through a series of scandals and became public (plus, popular on Reddit). However, at present, the company's numbers are far from their highs. Take a look at the chart. 

But if we augment the chart, we will see that this year looks much better and SoFi shares have outperformed the S&P 500 index – remember that the banking industry was, to put it mildly, in unstable conditions. Also, there are multiple factors that can influence the markets, industries and stocks. In order to forecast what changes may come next, you can use special trading tools such as economic calendar, informing you about all the significant events you need to know.

SoFi has undergone significant changes from its focus solely on student debt. It has evolved into a financial company and online bank that aims to provide a wide range of financial services and products through a single mobile application. Many customers still have to open accounts in multiple banks to get all they want – SoFi aims to address this issue.

The company's objective is to create a so-called super app working with individuals as well as businesses. Some experts and clients perceive this neo bank as a market participant that challenges traditional cumbersome banks. Consequently, investing in SoFi stocks may hold potential as a long-term investment.

Moreover, the last earnings report illustrates SoFi's rapid growth. Net revenue in the first quarter increased by 43% year-over-year, reaching $472 million – much better than expectations. Notably, adjusted EBITDA reached a record high of $76 million, and the user base saw a 47% surge. Following this powerful data, SoFi stock experienced an upward trend at the beginning of May, but then quickly took the course of a sharp dive. 

This decline occurred due to certain experts revising their targets for SoFi and identifying negative aspects within the otherwise positive report. Loans maintain the most significant part of SoFi’s revenue – and the most common approach is to issue loans for origin-to-sale, earning  profit from fees. But there were no loan sales in the first quarter, and SoFi relied on unsecured loans to generate substantial revenue. It doesn’t sound great when the US economy is at risk of recession. Plus, we shouldn’t forget about the moratorium on student loan payments appearing during the pandemic — the factor still exists and pressures on SoFi stocks.

Bulls and bears have been engaged in this eternal battle, again. Nevertheless, despite these drawbacks, many experts believe it is a favorable time to purchase SoFi shares at their current low prices. The consensus forecast suggests a 33% increase in the next 12 months. 

Furthermore, it is worthy of special mention that SoFi shares are currently trading at levels that are not so far from penny stocks. They might be pretty volatile, therefore you should be especially careful and conduct thorough personal research before making any investment decisions.

This article was written in cooperation with TradingView