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SoFi Technologies (NASDAQ:SOFI) faced a sluggish start in 2024, with shares down more than 16% since January. However, despite this setback, there are compelling reasons for investors to maintain their SOFI positions.
Let’s delve into three key factors steering the SoFi stock outlook.
Navigating Student Loan Resumption
Following the resumption of student loan payments in the fall of 2023, SoFi, a major player in student loan refinancing in the U.S., is primed to capitalize on renewed opportunities. The company has a substantial track record in originating student loans and was significantly affected by the COVID-era pause on debt repayments. With repayments recommencing, a surge in demand for refinancing options is anticipated, presenting SoFi with a ripe environment to bolster its student loan business and yield long-term profits.
SoFi’s Q3 earnings report revealed a 24% year-over-year increase in the issuance of lending products, with a notable uptick in demand for student loan products. The company also rebounded to a net profit on a GAAP basis, reaffirming its return to stability.
SOFI’s Crypto Fluctuations
In a surprising move, SoFi ceased issuing and servicing cryptocurrency accounts in late November. At first, this strategic shift seemed to prioritize initiatives like Galileo over cryptocurrencies. However, in light of the SEC’s approval of a bitcoin ETF and the soaring cryptocurrency market, SoFi’s decision appears ill-timed, potentially resulting in missed opportunities in this budding space.
Rational Valuation Reassessment
SoFi’s recent profitable quarter has moderated its once exorbitant valuation. Presently, the online lending platform trades at 59.6x forward earnings. Although this figure may appear elevated, the company’s robust growth in recent quarters helps contextualize its valuation.
Moreover, SoFi is bolstering its international footprint through the Galileo product, acquired in 2020. Galileo, which offers technology solutions to fintech companies globally, added millions of new accounts in Q4 2023, demonstrating significant expansion.
On the date of publication, Tyrik Torres 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.
