The markets went wild last week after new economic policies were announced that could hurt near-term performance for many companies. The S&P 500 fell, and it’s now in negative territory for the year, down nearly 5%.
It’s much worse for fintech upstart SoFi Technologies (SOFI -11.20%). The online bank stock is down 27% year to date, eating into its gains of the past year. The bright side is that if you’ve been on the fence, now could be a great time to buy the stock. Here are three reasons to buy it right now.
1. Outstanding performance
SoFi stock was feeling some heat last year as it struggled with the fallout from high interest rates. It operates an all-digital bank that’s just getting started, and it doesn’t have the established roots and reliability of a traditional bank stock. It’s more vulnerable to economic volatility, and its core lending business was faltering.
However, it staged a strong comeback by the end of 2024, and all of its businesses are reporting solid performance. That starts with its burgeoning platform. SoFi provides easy-to-use financial services on its digital app, and it resonates with the students and young professionals that are its target market. It added 2.8 million new members in 2024 and added 4.1 million products.
Revenue increased 26% year over year to $2.7 billion, and the bottom line swung from a $301 million net loss to a $499 million profit. Lending revenue ended the year up 8%, and non-lending services increased 52% to become 49% of the total.
2. Incredible opportunity
Outstanding performance by itself isn’t a reason to buy a stock unless you are reasonably confident that it can continue for many years. SoFi has been expanding its platform to offer more services, which does a few things for the business. It makes it more attractive to new members by presenting a one-stop shop for all of their financial services, it generates increased engagement among existing members as they become a part of the ecosystem, and it defuses the risk associated with leaning too heavily on one product.
The company obtained a banking charter when it purchased Golden Pacific Bancorp in 2022, and it keeps launching new features and services. Some recent ones include the only tool available to individual investors to invest in Elon Musk’s SpaceX venture and a robo-advisor through its partnership with BlackRock.
A different expansion was its acquisition of Galileo in 2020, a white-label financial infrastructure service for business clients. This segment hasn’t been delivering high growth, but it is growing, and its inclusion in the business serves to further diversify its offerings and risk as well as build up the financial ecosystem.
Management has its sights set on becoming a top-10 financial institution, and there’s reason to believe it can get there. It might take a while, but that gives shareholders many years of potential gains along the route.
3. The price is attractive
With the plunge in the stock price, SoFi stock is trading at attractive levels right now. Its forward, one-year P/E ratio is 27, while its price-to-book ratio is 2.1. That’s more expensive than the typical bank stock, but SoFi isn’t the typical bank. It’s growing much faster than a standard bank, and the technology that it uses to make its platform a better alternative gives it tremendous opportunity.
The market is fragile right now, and growth stocks generally feel that more than established, large industry leaders. That’s why the Nasdaq is leading the retreat while the blue-chip Dow Jones Industrial Average is outperforming the S&P 500. If you do buy growth stocks like SoFi at this time, go in knowing that there may be volatility ahead. But if you’re prepared to hold for the long term and won’t panic-sell if things get tougher, you should come out on top.
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