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Start Accumulating SoFi Stock Before Its Inevitable Move Back Up

When SoFi (NASDAQ:SOFI) posted an unexpected loss from student loan refinancing, the company lost some bullish momentum. Since the disclosure in August, SoFi stock is taking a long time to climb back to yearly highs.

the Social Finance (SoFi stock) logo is displayed on a smartphone.

Source: rafapress /

The fintech firm has more headwinds hurting the stock’s performance. Once the market absorbs the debt raise and the weak third-quarter guidance, investors may consider accumulating the stock later on.

On Sept. 29, Sofi raised its $750 million convertible senior notes offering to $1.1 billion. The company will use some of the proceeds to fund costs related to entering capped call transactions.

It will use the rest of the cash raised for general corporate purposes. The company did not specify whether the notes offering is related to its Golden Pacific Bancorp announcement in March. Regulators could approve Sofi’s bank charter next.

From the press release, SoFi said, “SoFi will pay $2.55 in cash for each share of GPB or approximately $22.3 million in aggregate to acquire GPB to advance SoFi’s effort to obtain a national bank charter.”

Furthermore, it said, “the proposed acquisition is a key strategic step in SoFi’s path to obtaining a national bank charter.”

The market’s negative reaction to the dilutive debt offering may prove overdone.

Strong Q2 Results and SoFi Stock

In the second quarter, Sofi posted member growth of 113%, up to 2.6 million. Net revenue grew by 101% to $231 million. The third-quarter guidance is lighter than markets expected.

The company expects net revenue of $245 million to $255 million. Adjusted EBITDA is a negative $7 million. Despite the loss in the upcoming quarterly report, Sofi is bullish on its revenue forecast. It expects revenue for 2021 at around $980 million and an adjusted EBITDA of $27 million.

Sofi lowered its revenue guidance by $40 million. The CARES Act moratorium on student loan payments hurt its student loan refinancing forecast.

The markets may take advantage of investor impatience by accumulating SoFi stock on weakness, expecting that loan refinancing revenue will rebound in future quarters. The company’s growth prospects in fintech did not change. Furthermore, Wall Street analysts are not keen to recommend the stock.

SoFi stock has an average price target of $24.50, according to Tipranks. The target range varies widely, from $16.50 to $30.00. It trades today just shy of $19.40.

SoFi Has Multiple Tailwinds

SoFi ’s acquisition of Galileo last year is a positive catalyst. It will continue investing in Galileo technology and already has built a cloud environment in the last year. Now it is transitioning its partners to the platform.

The company will realize cost savings, then use the savings to invest back in the business. This includes new product development that it deploys to its partners.

Expect the company to increase its revenue growth through this positive partnership development.

Sofi offers customers multiple banking solution products. The company, which lets members “borrow, save, spend, invest and protect their money,” keeps attracting new members.

Investors may count on SoFi reporting triple-digit growth for all its products. For example, Chief Executive Officer Anthony Noto said that customers want their SoFi Money, SoFi Invest, and SoFi credit card products.

The company may leverage product growth through its distribution and platform capabilities, called At Work.

SoFi ’s lending business has multiple tailwinds. The macro-environment is favorable, thanks to low interest rates. This will drive its student loan refinancing and home loans business volume.

In the second quarter, personal loans performed well. SoFi originated around $1.3 billion, nearly double from last year. CEO Noto said that its buy now pays later offering generates strong interest.

SoFi ’s bank charter process is the next catalyst. CEO Noto said that there wasn’t a definitive timeline to the process. Instead of guessing when it gets the charter, investors would do well to build a starter position in SoFi at current levels.

Risks and Your Takeaway

Not all of Sofi’s products will add to profits. They could take several quarters before adding to the bottom line. Still, the firm has Robo accounts and cryptocurrency offerings. This will add to revenue if assets under management increase.

The exchange-traded funds and crypto markets are very competitive, which may slow growth. Since it offers many products, Sofi may offset the underperformance with faster-growing products that appeal to its customers.

Sofi is trading well below 52-week highs. Investors have many credit services firms to pick from. Sofi is a fast-growing company. As it attracts more customers and becomes better known, the stock will rise.

On the date of publication, Chris Lau did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the Publishing Guidelines.

Chris Lau is a contributing author for and numerous other financial sites. Chris has over 20 years of investing experience in the stock market and runs the Do-It-Yourself Value Investing Marketplace on Seeking Alpha. He shares his stock picks so readers get original insight that helps improve investment returns.