It’s time for investors to join SoFi technologies
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A great earnings report is just the beginning for this fintech giant
SoFi technologies (NASDAQ: SOFI) The stock rose over 13% after posting strong gains after the market closed on November 10th. The fintech company posted negative earnings per share of five cents, well above expectations of a loss of 14 cents per share. The company also surpassed the revenue estimate of $ 277 million versus the estimate of $ 251 million.
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But this could be an occasion when a strong earnings report buries the leadership. There’s a bigger story propelling SOFI stock up. The fintech company can offer its members Access to pre-IPO stocks for Rivian’s upcoming IPO.
Rivian (NASDAQ: RIVN) began public trading on Wednesday, November 10, a day after the announcement that the IPO was valued at $ 78, making it not only the largest IPO of the year, but also the largest US IPO by size since makes for almost three decades.
An early entry into an IPO is almost impossible for most private investors. However, Rivian did offer SoFi members access to 0.5% of the pre-IPO shares. This will align the competitive conditions for private investors who were previously excluded from the IPO process.
In an interview with FoxBusiness, SoFi CEO Anthony Noto noted that the SoFi customer base complements Rivian’s target customer base. This provides an opportunity for Rivian to reach shareholders who are likely to be long-term investors in Rivian stock.
Shoot for the stars
SoFi was one of the many SPAC stocks to hit the market in late 2020. And that could explain why investors bailed out on SOFI shares earlier in the year. The hope (or mythology) behind many SPAC stocks was quickly blunted by the fact that many of these companies actually pose speculative risk.
In the case of SoFi, I don’t think investors have seen a speculative stock, just a less exciting one. SoFi was launched as a fintech company that a full menu of options including loans, insurance and cash management. And consumers can access it through the company’s mobile app.
In fact, one of the many popular features SoFi offers its customers is the ability to do business, including trading in cryptocurrency.
And the company is doing something right. It currently has nearly three million members, including 377,000 in the last quarter alone. One reason for this is the company’s takeover of the Galileo payment processing system. Galileo produces application program interfaces (APIs) that provide “customer-facing and back-end functions for fast-growing financial service providers”.
Galileo is owned by SoFi and acts as a kind of gatekeeper for the rest of the industry. It’s also an integral part of SoFi’s bigger ambitions.
Don’t get ahead of the story
Another potential catalyst for SoFi was their efforts to obtain a banking charter. This would allow the company to compete with traditional banks. In theory, this would mean that their customers would not need access to a traditional bank.
Noto says SoFi doesn’t have a definite timetable for when or if it could get its banking charter. This is neither good nor bad, it just reflects reality.
However, this means SoFi will remain primarily a lender for the time being. Many investors will not be enthusiastic about this. However, if the company succeeds in obtaining a banking charter, it will have a lower cost of funds to support further growth. And that will likely lead the analyst community to re-evaluate SOFI stock. If you are a patient investor with a certain level of risk tolerance, this is the case when you should participate in SOFI stock.
SoFi Technologies company profile (NASDAQ: SOFI)
SoFi Technologies, Inc. provides digital financial services. The company operates in three reportable segments: Loans, Financial Services, and Technology Platform. Its financial services enable its members to borrow, save, spend, invest, and protect money. The company offers student loans; Personal loans for debt consolidation and home improvement projects; and home loans.
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