SoFi Technologies (SOFI) stock is attempting to reverse after a 35% peak-to-trough drop. As the market turns against all things growth, though, the innovative fintech play could struggle to form a bottom by year-end.

Despite recent selling pressure, analysts are in no rush to downgrade their ratings, or price targets. As a result, SOFI stock is one of the higher upside tech names.

SoFi Clicking with Millenials

The financial services industry is overdue for a technological makeover.

As a digital-first service provider, SoFi isn't just a company that can pass on the savings to its users; it's able to improve upon the experience to make it easier and cheaper to take command of one's financial future.

With SoFi's easy and convenient offering, younger consumers can stay on top of their refinancing of student loans, mortgages and investing without having to go through the tedious process of meeting up with someone at the local branch.

A number of banking incumbents that failed to cater to younger, less affluent (but very tech-savvy) consumers will need to play catch-up over the coming years.

Millennials are getting wealthier with time, and they're demanding more from the major financial institutions. Although many big banks have their own digital offerings, few can stack up against SoFi's.


As the industry continues shifting gears from traditional to digital banking, SoFi could face increasing competitive pressure from the incumbents.

Many banks that stand to be disrupted aren't going to sit around and watch up-and-comers like SoFi steal a growing slice of their pie.

With deep pockets, big banks can be expected to innovate or acquire their way to greater success in digital. It's this competitive pressure that could push profitability further away from SoFi, as it looks to reinvest to stay on the cutting edge.

Furthermore, it's not just financial companies that SoFi will be up against. Many technology companies are hungry to make their mark in the fintech space.

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Still, getting into banking as a tech company could prove to be a case of "easier said than done." With Alphabet recently throwing in the towel on its "Plex" banking service in under a year, the width of SoFi's moat may very well be underestimated by other tech titans.

Given SoFi's improving brand affinity among young people, and its rapid pace of innovation, it will be tough to catch up to the firm, especially as its digital offerings grow over time.

Bottom Line

SoFi has helped many millennials get out of water with their hefty student debts. Many such millennials will be sticking with SoFi when it comes time to get a mortgage, take out a business loan, or start investing.

By catering so well to the young millennial cohort, SoFi is arguably one of the best ways to play where the puck is headed next in the previously rigid financial sector. (See SOFI stock analysis)

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Disclaimer: The article was written by Joey Frenette. At the time of publication, Frenette did not have a position in any of the securities mentioned in this article. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.

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