Prediction: SoFi Could Be One of the Best Bank Stocks Over the Next Five Years. Here’s Why

SoFi Technologies (NASDAQ: SOFI) was riding high last year as a business, demonstrating incredible growth despite elevated interest rates that were sinking many banks’ stocks. Management confidently promised that it would report a net profit in the fourth quarter, and it came through on that promise.

But after more than doubling in 2023, SoFi stock saw a partial sell-off after recently reporting another excellent, much-anticipated quarterly report. The stock remains down 26% so far in 2024. Are investors missing something?

Invest in the future of banking

SoFi started as a student loan cooperative, but it now offers a complete suite of financial services on its all-digital banking operation. Its app interface offers bank accounts, investing tools, and more.

This business model accomplishes several things for SoFi. It kept the company solvent through the pandemic-related student loan pause, since SoFi could rely on several alternative revenue-generating segments. It encouraged customers to adopt more products, leading to higher revenue per user and lower servicing costs. It helped SoFi scale up to the point where it could profit on its services. It is also helping SoFi lay the groundwork for success as digital users increase.

As more and more banking is going online, SoFi is well-positioned to benefit. It’s setting itself up now for success in the near term, but even more so in the long term. According to Statista, digital banking users will keep increasing over the next two years, and that trend is likely to continue for many years.

Image source: Statista. Note: Data is from a report released in March 2021. All figures except for the 2021 figure are estimates.

Most banks offer digital banking these days, but SoFi is a new breed of all-digital banks that offer low fees and high savings rates. It’s geared toward millennial and Gen-Z users who are drawn to its simple and easy-to-use interface. This younger cohort will grow along with SoFi and provide years of revenue and profit generation.

Smart investors prepare for the long term. SoFi is an incredible deal at the current price, sporting a price-to-sales ratio of 3, and this is an excellent opportunity to buy shares on the dip.

Should you invest $1,000 in SoFi Technologies right now?

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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.

Prediction: SoFi Could Be One of the Best Bank Stocks Over the Next Five Years. Here’s Why was originally published by The Motley Fool