In all likelihood, SoFi (NASDAQ: SOFI) is expected to post a surprise in terms of third-quarter earnings, when it is published on November 1. The need for personal loans continues to increase, especially during tough economic times when people generally need 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 take advantage of this trend, as it offers both consumer financial services and loans. The future looks bright for the company. Therefore, we are bullish on SOFI stock.
Investors are hoping strong bank earnings signal the resilience of the economy. Investor optimism has been high lately, with most reacting positively to recent financial results from major banks. This is great news for SOFI investors, who had been hoping that strong bank earnings would signal that the financial sector is on the way to a comeback.
SoFi’s stock has fallen more than 65% since the start of the year, but it should recover soon. It only has two months left this year, and if it can create an earnings surprise, we could see its price rise again. It trades at a beta of around 2.0, which suggests it is twice as volatile as the broader market. Therefore, investing in it carries a fair share of risk.
However, it presents itself as an excellent bet before winnings. It is currently trading at around 3.5 times forward sales, which is significantly lower than a few months ago.
SoFi taps into growing demand for personal loans
The financial services offered by SoFi are designed to help consumers with their daily needs. The company has won millions of customers through high-yield checking and savings accounts, credit cards, brokerage services, and more. Moreover, it offers loan products that can be approved faster and at better rates thanks to its massive database. SoFi is essentially a financial one-stop-shop.
In recent quarters, the company has exceeded expectations. With its third quarter results looming, it is plausible to assume another strong performance on the back of a robust personal lending trend that continues to grow steadily. SoFi’s expansion into new markets and its ability to provide personalized service will make it easier to reach new customers.
Additionally, the company’s strong balance sheet is a major asset to the business. He holds a whopping $707 million in cash, giving him plenty of leeway to continue growing his business at a healthy pace for the foreseeable future. What is more encouraging is that his losses have improved considerably.
It recorded 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. Earnings may turn positive by next year. Additionally, SoFi ended the quarter with 4.3 million members, a 69% improvement over the same period last year.
Therefore, we are extremely positive about the future growth and success of the business. Its losses are unlikely to hamper its plans going forward, and with student loans drastically improving next year, SOFI stock could rebound strongly.
What is the price target for SoFi shares?
As for Wall Street, SOFI stock maintains a moderate buy consensus rating based on six buys, three holds and no sells assigned over the past three months. The average SOFI price target is $8.25, implying an upside potential of 51.38%. 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 release its third quarter results soon, and investors will have a better understanding of where it stands. In all likelihood, however, he should display another solid pace in both his top and bottom lines.
The rise in personal loans is fueled by consumers looking for debt consolidation and easily accessible funds. SoFi capitalized on this opportunity by growing its origination rate faster than its peers.
Stocks have trended higher following recent bank earnings, but investors should also prepare for greater volatility. The Federal Reserve will raise interest rates at its upcoming meetings over the next two months as inflation remains incredibly high.
Therefore, volatility is a given in the current market scenario. However, that doesn’t take away from the quality of SoFi and a long-term bull case. Investors should look to the long term and buy the stock as 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.