Key Points
SoFi Technologies (NASDAQ: SOFI) stock has been having an awful year, but the digital bank is growing rapidly, and it represents the future of finance. Down 29% year to date, it could be a bargain. But could it turn $25,000 into $1 million?
Why are there big expectations for SoFi?
SoFi is an all-digital bank, and it stands out in a crowded space in a few ways. It aims to be a complete financial app that allows users to manage every aspect of their finances, and it’s constantly releasing new products and features to generate higher engagement. From its roots as a student loan company, it has expanded into bank accounts, including receiving a bank charter through its 2021 acquisition of Golden Pacific Bank, as well as investing, credit cards, and more.
While its traditional products cement its status as a stable player in banking, the newer, bolder products are attracting a young, digital-savvy clientele. It recently unleashed a whole slew of tech-based services, including cryptocurrency trading through its app, international wire transfers on the Blockchain, and its own SoFi stablecoin, which is tethered to the U.S. dollar.
SoFi is also acquiring Composer, an artificial intelligence (AI) agent for investing, that can create strategies, follow prompts, and carry out trades.
SoFi has been reporting phenomenal growth. Adjusted net revenue increased 41% year over year in the first quarter, driven by a major rebound in the lending business despite high interest rates, and robust performance in its financial services segment, which includes all non-lending services outside of its wholesale Tech Platform product.
Can it turn your $25,000 investment in $1 million?
SoFi stock has been fairly volatile since its initial public offering (IPO) a few years ago. It had to prove itself by growing over time and becoming profitable, both of which it has done. It has also been quite expensive at times, limiting its upside and creating conditions for a sell-off on bad news, which has happened. At today’s lower price and valuation, it can start to climb again, and it has.
But can it turn $25,000 into $1 million? That implies a 40-fold increase, or a gain of 3,900%. That’s a tall order for any stock. SoFi has a market cap of $25 billion today, and growing that much means reaching a market cap near $10 trillion.
While that doesn’t seem like an impossibility far off into the future, it does look highly unlikely. I wouldn’t invest $25,000 with that expectation, but I do think SoFi stock could really take off and reward investors as part of a diversified and growth-oriented portfolio.
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Jennifer Saibil has positions in SoFi Technologies. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
