Down Almost 25% YTD, Are SoFi Shares (NASDAQ: SOFI) A Buy?

SoFi Technologies, known for its digital financial services, has undergone a significant transformation. Shifting from its earlier status as a growth stock, Having now emerged as a profitable fintech enterprise, and after a recent beat, could the stock be set to shift the momentum?

Since this sustained shift to profitability, from the lows of April 30th SoFi's stock price (NASDAQ: SOFI) has witnessed a 7.23% rally, but still stands down 25% through this year. With analysts at Wedbush seeing the firm entering a ‘transition year', and those at Needham seeing strength off the back of the full banking licence, we need to take a closer to look at the numbers and forecasts from across the street.

In the first quarter of 2024, SoFi reported a 35% increase both in its member count and its product offerings, showcasing strong growth in its operations. EPS of $0.02 against a consensus expectation of $0.01 has shifted the mood. The company's success was also evident in the fourth quarter of 2023, where it achieved positive net income for the first time. This streak of profitability is not a short-term event; SoFi has continued to profit in the first quarter of 2024 and has provided guidance for sustained profitability ahead.

Interestingly, SoFi's stock experienced a drop in the immediate aftermath of its strong performance, with the possibility of profit taking from those who had ridden the upward wave over the preceding 12 months. With 30% gains from May 23 to 24, those who were swing trading the stock may have seen an opportunity to step back and reassess.

After 7 consecutive quarters of earnings beats, dating back to Q3 2022, the drop in revenues vs the previous quarter this time could also be weighing a little heavier. The firm had previously shown revenue growth for 11 consecutive quarters, dating all the to 2021 when SoFi stock listed on the Nasdaq.

The financial services segment within SoFi is experiencing particularly high growth, expected to surge by 75% year over year in 2024. The strategy is clear: financial services are envisaged to make up half of SoFi's total revenues. In the lending domain, despite the high-interest-rate environment, SoFi projects its revenue to hover between 92% to 95% of the previous year's levels. This prediction is supported by growth in personal, home, and student loan originations.

SoFi's current market price, juxtaposed with the projections and price targets of analysts suggests there is still plenty in the stock. The consensus mark from the 18 analysts noted covering the stock at TipRanks of $8.91 reflects significant potential upside of more than 22% from the last close but the rating is a ‘hold'. The high mark of $14 set against the low of $4 however does highlight the large disparity in the views from the street.

The transition from a high-growth stock to a profitable entity is not an easy one, but the competitive performance in revenue growth, particularly in its financial services segment, present an interesting scenario for SOFI holders.