Like many reporters and analysts my SoFi (NASDAQ:SOFI) stock forecast has been steadily bullish since the fintech went public in 2021. It closed that day at $22.65. It opened February 8 at $7.67. I was among those who “bought the dip” in the mid-teens.
But the question for today is whether you should buy SoFi, today, at its current price? Will it make a young investor some money? Can it come good? Yes it can. Although it depends on what you mean by good.
A SoFi Stock Forecast: What Went Wrong
Mostly, SoFi is a consumer bank. It buys money as deposits. It sells money as consumer loans.
This is not a sexy business, although it can be profitable. Wall Street doesn’t place a high value on it. DAVE (NASDAQ:DAVE), a digital bank that started off with even higher hopes than SoFi, is now a penny stock with a market cap of $266 million.
Ally Financial (NASDAQ:ALLY), the General Motors (NYSE:GM) consumer banking spinoff, has been mostly spinning its wheels for a decade and a half. Synchrony Financial (NYSE:SYF), the General Electric (NYSE:GE) banking spin-off, has barely moved in five years.
Of course, SoFi promised to be much more than a consumer bank. It offers brokerage services, it wholesales its capabilities through software, and you can even get crypto. But most of its money today still comes from lending.
Banks have lost their former greatness. The iShares Regional Bank ETF (NYSEARCA:IAT) now costs less than it did five years ago. The entire banking sector is losing ground in lending to private equity, which doesn’t carry its heavy regulation, because it doesn’t have to protect the depositors’ money.
This is why professional analysts are souring on SoFi. Tipranks has 16 following it, evenly divided between buyers and sellers. The average price target is just over $9. They’re not expecting much.
But maybe that’s a good thing.
A Look at the Numbers
Now let’s look at what SoFi did in 2023 to justify its $7.6 billion market cap. For all of 2023 SoFi lost $94 million, 10 cents per share, on revenue of $2.1 billion. It did show a profit of $24.6 million, 2 cents per share, in the fourth quarter.
The good news is SoFi lending had a net interest margin of 6.02%. It generated Earnings Before Income Taxes, Depreciation, and Amortization (EBITDA) of $181 million, and the EBITDA margin was 30%, in line with CEO Anthony Noto’s targets.
SoFi now has 7.5 million account holders, and 145 million users on its technology platform. That platform includes its wholesale banking services, sold through Galileo and Technisys. But the number of people on the technology platform grew just 11%, and revenue was up just 12%.
The report did have some good numbers in it. Personal loan volume was up 41% on the year. Net interest income was up 81%. Total revenue in the financial services segment jumped 160%. There are indications that the “flywheel” of earnings is starting to work.
For 2024 SoFi is anticipating net revenue of at least $550 million and positive net income of $10-20 million. It expects lending revenue to nearly double thanks to the technology and financial service platforms. Two years from now, SoFi is projecting GAAP earnings of 55-80 cents/share.
The Bottom Line
SoFi’s decision to become a bank, to take deposits and to be regulated as a bank, saved it during the tech wreck of 2022, but it does limit its growth prospects according to my SoFi stock forecast.
If SoFi can get earnings to 80 cents, a price to earnings ratio in the mid-teens leaves you with a $12 stock. That’s not a go-go tech number. That’s a nice, safe bank number.
A young investor building a portfolio should thus consider SoFi ballast. It won’t be a home run, but it could hit singles and doubles for years to come. That’s not what was promised at the IPO, but it’s a lot better than what other SPACs have done.
As of this writing, Dana Blankenhorn had a LONG position in SOFI. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.