Despite recent positive attention, analysts are expressing caution about investing in SoFi Technologies (NASDAQ:SOFI). It is advisable to wait for the buying pressure to ease before making any hasty trades with SOFI stock.
While I maintain a bullish outlook on SoFi Technologies as a long-term investment in the technology-based banking sector, it is important not to chase after a stock that has experienced rapid and significant gains.
That said, with year end approaching and momentum already in favor of SoFi Technologies, it may be a good time to take some exposure to the stock. Let’s delve in to identify some key reasons now could be a great time to invest in SOFI stock.
SoFi Technologies’ Price Increase
SoFi Technologies stock has experienced a significant surge in the past month, almost doubling in value. The company’s market cap now stands at $8.8 billion, although it remains below the peak of the 2021 boom.
SOFI stock surged from $4.50 earlier this year to nearly $10 in mid-June, doubling in value in a short period. However, the extreme short-term optimism seems unjustified considering SoFi Technologies’ consistent lack of profitability.
The stock’s rise can be attributed to factors beyond overall market strength in 2023. Specifically, provisions in debt ceiling legislation negotiations that would reinstate required repayments for federal student loans boosted SOFI stock due to the company’s revenue from refinancing student loan repayments.
SoFi Is More Than Just Student Loans
SoFi operates as a digital bank, providing a range of lending, banking, and investment services without physical branches.
The company has experienced remarkable growth since its establishment in 2011, leveraging the widespread use of smartphones and the internet. By March 31, SoFi had amassed 5.7 million members, reflecting a remarkable 421% increase in just three years.
SoFi’s digital-only model offers seamless access and movement of funds for customers. During the recent regional banking crisis, SoFi experienced a substantial deposit increase from $7.3 billion to $10.1 billion by March 31.
This surge may be attributed to the launch of a program providing up to $2 million of Federal Deposit Insurance Corp. protection, reflecting a strong vote of confidence from customers.
After facing a significant decline in previous years, SoFi’s stock has surged by 75% this year, signaling a potential turnaround. Despite this recent gain, there remains further potential for growth in the long run, considering SoFi’s potential in the expanding fintech industry.
What Now?
It’s important to consider the frothy trader sentiment surrounding SoFi Technologies, which raises legitimate concerns. For now, there is no need to take immediate action.
Patience is key, especially when a stock has experienced a significant rally and is prone to a potential pullback. Waiting for SOFI stock to retreat to around $6 before considering a long position is a prudent strategy for those who have a bullish long-term outlook on SoFi Technologies.
The timing and price of entry are crucial factors to consider.
On the date of publication, Chris MacDonald 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.
