- Despite record fourth-quarter results, SoFi’s share price is still near all-time lows.
- SoFi’s top line has accelerated at a compound annual rate of 54% over the past three years.
- SoFi’s value has become quite appealing due to the ongoing retreat.
SoFi Technologies (NASDAQ:SOFI) has lately been affected by the stock market’s volatility, but is SoFi a buy now? Technology stocks have suffered the most, as news of future interest rate hikes and concern about Russia and Ukraine have prompted investors to seek refuge in more established businesses. As a result, SoFi shares have dropped 68% in the last six months and are trading near their 52-week low.
SoFi stock could be a speculative investment because it has a long way to go before its positive earnings. Nevertheless, it’s our duty as long-term investors to determine if firms like SoFi will make money in the future. In SoFi’s case, profitability appears quite likely; the business is a member of a multi-trillion dollar market and continues to report stunning financials every quarter. So today, prudent investors should not hesitate to add SoSi to their portfolios.
For those who don’t know, SoFi is a firm that provides financial services like student and automobile refinancing, mortgages, personal loans, credit card services, investing, and banking via mobile app and desktop. Investors should be ecstatic with the way SoFi ended 2021. The company reported an adjusted top line of $1.01 billion for the year, up 63% YOY. Adjusted EBITDA (earnings before interest, taxes, depreciation, and amortization) was $5 million in the fourth quarter, continuing a streak of six consecutive quarters where it finished positive.
SoFi’s member adds increased by 39% year over year in the fourth quarter, with SoFi’s total member count reaching 3.5 million at the end of 2021. Despite a net loss of $1 per share, SoFi revealed significant progress from its loss of $4.30 per share last year. However, management predicts that there will be a reduction in first-quarter sales by as much as $35 million. That prediction results from the suspension of federal student loan payments, which the government extended past the intended finish on May 1.
Student loan effects
According to the projections, if the student loan moratorium had ended in January as planned, revenue would have topped $310 million to $320 million in the first quarter. However, it now predicts a top line of $280 million to $285 million, implying growth of 30% to 32% year over year.
SoFi’s management is projecting that adjusted sales will reach $1.57 billion in the entire year, representing a 55% boost from 2021. This growth is still remarkable, and investors should be happy with SoFi’s ability to overcome obstacles as it improves. Analysts anticipate an adjusted EPS loss of $0.45 for 2022 on the profitability side. It’s good to see that SoFi is moving in the right direction, although there is no expectation of positive net profits this year.
An attractive valuation
SoFi was selling for 7.2 times sales in October 2021. Today, SoFi sets a price-to-sales ratio of 5.4. The big picture is quite astounding considering the 63% growth in 2021 and expected further increase above 50% in the following year.
SoFi’s stock price is trading at a lower price than most of its fintech rivals. Moreover, price-to-sales multiples for Lemonade (NYSE:LMND), Upstart (NASDAQ:UPST), and Affirm (NASDAQ:AFRM) are all larger than SoFi’s. In that light, SoFi’s recent share price downturn has produced an attractive valuation for the firm.
Is SoFi a buy now?
SoFi’s deficits make it a risky investment today. However, SoFi’s track record of success despite headwinds such as the student loan moratorium shows that it can increase. Moreover, as cash abandonment in day-to-day transactions continues to gain steam, demand for SoFi’s services is expected to rise. Given that SoFi’s price has fallen to 52-week lows, now may be the right moment to buy SoFi to add to your long-term portfolio.