Like many of its peers in the fintech sector, Sofi Technologies (SOFI) stock has been taking a hammering over the past few months. However, that all changed on Wednesday, after the company was granted the long-hoped-for U.S. banking charter by the Office of the Comptroller of the Currency.
The much-needed sentiment boost could help kick off a turnaround and Wedbush’s David Chiaverini believes the final hurdle cleared on the path to becoming a bank should “accelerate earnings growth.”
However, that is not the only thing the banking disruptor has going for it. “The company is a one-stop shop for financial services and this is a significant competitive advantage over neobank competitors who tend to focus on niche offerings rather than the full financial picture,” the 5-star analyst said.
SoFi is also well-positioned to compete with legacy consumer finance providers due to its “streamlined product offering,” while a younger age group are also more likely to be attracted to the company rather than traditional banks, who are seen as out of date, unfriendly fee-wise, and given their business segments often “operate in silos,” often have “friction” in the cross-selling process.
In contrast, SoFi has a competitive advantage, due to its integrated technology platform Galileo, which provides a “seamless cross-buying experience aimed at a digitally native younger cohort.”
Moreover, the company has been growing at a fast pace and is expected to continue doing so. In 4Q21, members crossed the 3 million threshold, well above the 1.7 million notched a year ago and far above the 1 million of two years ago.
Likewise, revenue growth has been impressive; from $600 million last year and $450 million beforehand, the company has guided to almost $1 billion of revenue in FY2021E.
While SoFi has a five-year plan in place, which Chiaverini thinks might be “overly optimistic" (the revenue forecast for 2025 is $3.7 billion compared to Chiaverini’s $2.9 billion estimate), the analyst still anticipates a CAGR of 28% over the next five years, an “exceptional level of growth,” which should see the company attain revenue of $3.5 billion by 2026.
Accordingly, Chiaverini initiated coverage on SOFI shares with an Outperform (i.e. Buy) rating and $20 price target. Investors could be pocketing gains of ~46%, should the analyst's forecast hit the mark over the next 12 months. (To watch Chiaverini’s track record, click here)
Overall, SOFI has attracted a total of 10 analyst reviews recently, including 7 Buys and 3 Holds for a Moderate Buy consensus rating from the Street. SOFI shares are priced at $13.71 and have an average price target of $21.40, giving the stock a 56% upside on the one-year time frame. (See SOFI stock forecast on TipRanks)
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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.