SoFi technology (NASDAQ:SOFI) We have benefited from favorable market conditions. Since the start of 2023, the stock price has increased 60% (as of March 6), backed by strong financial results.
Looking at the bigger picture, there are plenty of reasons to value this business. In fact, shareholders can be rewarded handsomely over the long term.
That being said, can this be digitized? bank stocks Would you like to help us become millionaires someday?
destroy large industries
The financial services industry is one of the oldest industries in the world and one of the most ripe for disruption over the past decade, in part due to its slow pace of innovation. The proliferation of smartphones and the internet has only emphasized the fact that there needs to be a better way to serve customers.
This is exactly how SoFi rose to prominence. This online-only financial institution operates a truly digital business model that blends technology and banking, without relying on physical bank branches. It's all about improving the user experience.
While the business started out solely offering financing solutions for students to pay for their education, SoFi has evolved into a full-fledged banking service provider. We also offer personal and mortgage loans, as well as checking and savings accounts, credit cards, brokerage services, and insurance products.
It also helps that SoFi targets younger, higher-income consumers. As they get older, their incomes increase and their financial needs become more complex, giving SoFi the opportunity to cross-sell different products. This, in turn, could lead to increased switching costs, reduce the risk of customer churn, and strengthen SoFi. economic moat.
Considering these attractive characteristics, it's no surprise that growth is a key story for this business. Last year's revenue amounted to $2.1 billion, an increase of 35% over the previous year and an increase of 275% compared to three years ago. SoFi currently has 7.5 million customers and added 585,000 in the fourth quarter.
Management is very optimistic about the future. Executives said they expect revenue to grow at an average annual rate of 20% to 25% from 2023 to 2026. Although the increase is smaller than in the past, it is still a healthy expansion.
Key investment considerations
Given the details above, it's hard not to get excited about SoFi. However, investors cannot ignore some important factors that definitely influence the possibility of high returns.
As of this writing, the stock price is forward price earnings ratio For a company that has focused primarily on customer acquisition and investing in growth opportunities, it's not surprising that SoFI hasn't posted meaningful profits.
However, the situation has improved since last quarter. The company reported net income of $48 million, the first since SoFi went public. Management believes his earnings per share will total $0.63 by 2026, at the midpoint of the forecast. Based on current stock prices, the stock trades at 12 times 2026 estimates. That looks like a very attractive valuation.
However, these goals are far from certain. Despite its accomplishments, SoFi still operates in an incredibly competitive industry. Financial services are, after all, just a commoditized service. To maintain its growth and profit trajectory, SoFi needs to be at the top of its game over the next decade.
Anyone who wants to become a millionaire with a single stock must have serious belief in the business they are buying. With this perspective on SoFi, you can increase your chances of reaching your 7-figure goal by increasing the size and duration of your initial investment.
But regardless of whether SoFi can help achieve this goal, the stock looks like it's worth considering for now.
Should you invest $1,000 in SoFi technology right now?
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Neil Patel and his clients have no positions in any stocks mentioned. The Motley Fool has no position in any stocks mentioned. The Motley Fool has a disclosure policy.
Is SoFi a Billionaire Maker? Originally published by The Motley Fool
