SoFi Technologies Inc. (NASDAQ: SOFI) continues to build strong momentum, with its stock rising by 11.4% to reach $10.04—its highest price since the start of the year.
This surge is driven by key developments, including the recent $2 billion loan platform partnership with Fortress Investment Group and strong financial performance in Q2 2024.
Jim Cramer, the well-known host of CNBC’s Mad Money, seemed to be right on the mark when he urged investors to go long on SoFi, a recommendation now validated by the company’s recent achievements.
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With ongoing innovations in the financial technology space and expanding revenue streams, SoFi is in a prime position to capitalize on multiple growth drivers throughout the year.
Strategic partnerships driving expansion
A key factor behind SoFi’s recent stock rally is its $2 billion loan platform deal with Fortress Investment Group. This partnership enhances SoFi’s ability to expand its loan platform business by referring pre-qualified borrowers to loan origination partners and handling loan origination on behalf of third parties.
“SoFi’s loan platform business is an important part of our strategy to serve the financial needs of more members and diversify toward less capital-intensive and fee-based revenue streams.”
Anthony Noto, CEO of SoFi.
Keefe Bruyette, a prominent analyst firm, noted that this collaboration could significantly boost SoFi’s ability to generate fee income without consuming capital or taking on additional credit risk. However, the firm maintains a Market Perform rating on SoFi shares, with a price target of $7.
In addition to the Fortress partnership, SoFi recently launched DSP 2.0, an advanced Directed Share Platform (DSP) that offers a modern and streamlined solution for equity program management, helping companies raise capital in the U.S.
Earnings growth and diversification
SoFi’s financial performance has also played a crucial role in its stock surge. The company reported net revenue of $599 million and net income of $17 million in Q2 2024, marking its third consecutive quarter of GAAP profitability.
This growth was driven by a 46% increase in its Financial Services and Technology Platform segments, which now account for 45% of the company’s total adjusted net revenue, up from 38% a year ago.
This reflects SoFi’s strategic focus on diversifying revenue streams and reducing reliance on lending, making the business more resilient to macroeconomic fluctuations.
SoFi’s three reportable segments, lending, technology, and financial services, are seeing diversified growth. Its Financial Services segment, which includes products like checking, savings, and investing, has attracted a growing member base, contributing to a 41% year-over-year increase in membership.
Meanwhile, SoFi’s Galileo-powered Technology Platform continues to expand its fintech solutions globally.
Valuation metrics indicate upside
SoFi’s valuation metrics suggest further growth potential. The company’s market cap currently stands at $10.7 billion, supported by steady revenue growth and strategic partnerships.
Its Forward P/E ratio of 56.69 reflects investor optimism for future earnings, with expectations that SoFi will continue capitalizing on its diversified business model.
SoFi’s Price-to-Sales (P/S) ratio of 4.08 and Price-to-Book (P/B) ratio of 1.22 indicate the stock is fairly valued compared to its sales and book value, making it an attractive option for long-term investors.
These metrics, along with SoFi’s improving profitability and consistent revenue growth, suggest that the stock could see significant gains as the business scales.
In addition, lower interest rates could act as a tailwind. With the Federal Reserve cutting rates by 0.50% in September, this is likely to stimulate higher loan demand, boosting SoFi’s loan origination volumes.
In conclusion, SoFi’s strong partnerships, diversified business model, and improving profitability position it well for continued growth in 2024.
With lower interest rates providing an additional boost and upcoming earnings scheduled for October 29, SoFi stock could be poised to reach new highs this year, making it a stock to watch closely.
