SoFi (NASDAQ: SOFI): Buy Low Or Goodbye?

SoFi is in an interesting position right now. The digital financial services company has a unique target market: students and young professionals who are just starting to set up their adult financial futures. The company’s future looked extremely bright in 2023, with soaring stock prices and strong new customer acquisitions. But it’s tanked in recent months, leaving investors to try to determine whether SoFi is a strong buy low opportunity or a company on its way out.

The Case For

The case for SoFi lies in its unique value proposition. It’s capturing the hearts of young people who want to start off their adult financial lives on the right foot and, importantly, keeping them as loyal customers. The company added 600,000 new customers in the first quarter of 2024 and increased the total number of products its customers use by 38%. Its net revenue also went up by 37% YOY, and SoFi is on track for full-year profitability for the first time this year. Yet its current valuation puts it in bargain basement territory, with shares trading at a price-to-sales multiple of just 2.8, making it a potentially excellent buy.

The Case Against

Of course, things are never all rosy, especially for a company that is going through some volatility. Services are expanding once again, which is always a potential risk. For 2024, the lending side of the business is projected to come in at just 92%-95% of 2023 levels. Importantly, SoFi just announced a new equity offering, which has made analysts skittish about shareholder dilution.

Should you buy into SoFi now? That largely depends on your personal risk tolerance. If things continue to go well, the company could be entering a growth phase that may last for years to come. Those who are looking for more certainty, though, as well as investors hoping for rapid gains, may want to pass. There is likely still some more volatility ahead before things start to stabilize.

Neither Lisa Fritscher nor Stocks.News have positions in this company.