SoFi Technologies (NASDAQ:SOFI) is well known for being among the leading student loan financing companies in the market. However, as I’ve pointed out in recent pieces, SoFi stock is evolving into more than a one-dimensional player. This company is now a one-stop financial solution provider, with a strong focus on student loan refinancing. There’s a big difference there worth pointing out.
Now, the question many investors are asking is whether SoFi could be one of those rare millionaire-maker stocks. After all, if the company is able to grow as many think is possible, perhaps this is the case. The company has brought in some impressive recent results, and given the way student loan lending is trending in the U.S., there is what appears to be a strong growth runway ahead.
Let’s dive into this stock’s potential as a big multi-bagger for long-term growth investors.
This is a Company with Big Potential
SoFi has been disrupting the traditional banking and lending industry with its innovative platform. The company offers a wide range of financial products, including personal loans, mortgages, investment management services, and even cryptocurrency trading. For those looking for an intriguing way to play the financial technology (fintech) space, SOFI stock certainly provides plenty of upside growth potential.
Among the most notable longer-term drivers this company has is its focus on demographic areas of the market which are overlooked. SoFi’s target demographic is primarily millennials and Gen Z, who are tech-savvy and looking for more flexible and affordable financial solutions. As these younger borrowers enter the workforce and look for more integrated solutions, SoFi’s suite of products offering excellent value are likely to be the first choice for these target consumers.
With a rapidly-growing customer base and strong revenue growth, SoFi has already made a name for itself in the market.
Excellent Financial Standing
In my previous SOFI article, I also highlighted SOFI’s incredible fundamentals.
In Q2 2023, SoFi’s Financial Services segment surged, contributing over 20% of the $488.8 million adjusted net revenue, up from 8.5% in Q2 2022. The segment’s contribution loss shrank by 92% to $4.3 million. SOFI stock climbed 80% year-to-date to $8.12.
SoFi reported a 37% increase in total net revenue, reaching $498 million. Strong growth in personal loan originations led to net interest income (NII) more than doubling to $291.1 million in the quarter ending in June, surpassing analyst estimates.
Analysts predict a price range of $8.00 to $16.00 with 120% growth expected next year. Market cap rose from $4.28 billion in September 2022 to $7.77 billion in 2023.
Partnership with Mastercard
One of the more prominent catalysts I’m watching right now is a key partnership between SoFi and Mastercard (NASDAQ:MA). I view this collaboration as a notable development, given the reality that SoFi and Mastercard are, at their core, rivals.
SoFi’s subsidiary, Galileo, is teaming up with Mastercard to enable lenders to provide the Galileo Buy Now, Pay Later for B2B service to small businesses.
Buy now, pay later (BNPL) isn’t just for individuals; businesses can benefit too. Through this partnership, banks and fintechs partnering with Galileo can offer small businesses installment financing using Mastercard Installments. It enhances flexibility for small businesses, potentially boosting Galileo and SoFi Technologies’ credibility in value-added lending.
SoFi is making some intriguing investments and engaging in some partnerships that could pave the way for some significant growth over the long-term. Whether these pan out as expected or turn out to be duds won’t matter five or 10 years from now. The company just has to hit one home run for this strategy to work.
SOFI’s Resilience in 2023
SOFI stock experienced volatility in the latter half of 2023, largely due to concerns about prolonged high-interest rates. However, with the resumption of federal student loan repayments, SoFi Technologies is expected to perform well in the short-term.
That is, if rising interest rates don’t erode the company’s refinancing advantage. If SoFi’s borrowing costs increase significantly from here, the company will be forced to pass those onto student loan borrowers, who may simply wish to stick with their fixed rate they locked in at the time they generated their federal student loans.
SoFi is a fintech company with its fair share of headwinds. However, the fact that SOFI stock continues to hold most of its gains, and analysts appear to be generally bullish on its outlook, is comforting. I think SOFI stock represents a compelling risk-reward bet at current levels.
On the date of publication, Chris MacDonald 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 InvestorPlace.com Publishing Guidelines.