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Why SoFi Stock Soared 26% in October

By Dave Kovaleski – Nov 4, 2021 at 1:37PM

Key Points

  • SoFi's stock price is up 85% year to date.
  • It is expected to receive a bank charter soon, possibly in the fourth quarter.
  • The company posts third-quarter earnings on Nov. 10.

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The online personal finance company has experienced rapid growth, with more to come.

What Happened

SoFi Technologies (SOFI 12.46%) was so fine in October, as the stock price jumped 26.2% in the month, according to S&P Global Market Intelligence

The financial technology company blew away the S&P 500, which had a solid month, up 6.9%. SoFi is currently trading at about $23 per share and is up a healthy 85% year to date.

A person touches their face and looks into the distance.

Image source: Getty Images.

So what

SoFi is a relative newcomer to the market, having gone public in June via the special purpose acquisition company route. SoFi is an online personal finance company that began in 2011 as a student loan lender, but has since branched out into banking, personal loans, credit cards, mortgages, personal finance tools, and investing. It's all done via SoFi's mobile app.

SoFi has seen rapid growth, as its number of users/members has spiked to roughly 2.6 million at the end of the second quarter, up double year over year, and more than threefold from 759,000 in Q2 2019. Revenue gains have followed as revenue was up 101% year over year to $231.3 million. Third-quarter numbers come out on Nov. 10.

SoFi has three business lines: lending, financial services, and technology. The lending business is the largest, accounting for $166.3 million in revenue in Q2. The financial services business includes investing, credit cards, personal finance, direct deposit, employee benefits, and other services. Through the technology business, SoFi helps other companies with their own digital banking products, via its acquisition of Galileo last year.

What could take this young company to the next level is a bank charter, which it applied for last year and is expected to be granted by the end of 2021. A bank charter would allow SoFi to expand its capabilities, allowing it to take deposits and expand its loan offerings, among other things.

Now what

The October surge may be related to a few factors, chief among them SoFi's rapid growth. But also, the company offered $1.1 billion of senior convertible notes to institutional investors on Sept. 29 to raise capital for future expansion, likely related to the impending bank charter. Also, on Oct. 18, SoFi announced a partnership with Pagaya Technologies, a company that provides proprietary artificial intelligence and machine learning to fintechs and banks to reduce risk for lenders and better inform credit decisions. SoFi will offer loans through Pagaya's AI network. In addition, SoFi launched a new ad campaign, Move Your Money, in late September targeted at NFL and college football audiences.

The stock also spiked on Oct. 29 when LendingClub, a fintech similar to SoFi, with a bank charter, posted record earnings in the third quarter. Investors may have seen that as a good sign for SoFi.  

The company has a lot of momentum and that should continue next week after SoFi announces third-quarter earnings, followed by the expected granting of its bank charter in the fourth quarter.

Dave Kovaleski has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends SoFi Technologies, Inc. The Motley Fool has a disclosure policy.

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