The market downturn has been difficult to endure as most of us have watched our portfolios shrink. But one positive aspect of the correction has been that it has brought down the valuations and prices of some really good companies and made their stocks more affordable.
In fact, you can now find some excellent companies that are trading below $20 per share. Here are two of them you might want to consider.
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1. SoFi Technologies, $8.55 per share
SoFi Technologies (SOFI 0.26%) is an online financial services firm with an app that offers loans, mortgages, banking services, investments, personal finance tools, and direct deposits, among other services. The company has seen its stock price plummet precipitously this year, down 41% year to date and roughly 61% since early November. It currently trades under $9 per share and was hit hard by the correction of overvalued growth stocks.
The fintech went public early in 2021 and is still not profitable. But there is a lot to like about SoFiʻs potential. It has been growing rapidly, setting records for new members/users added and products used in the fourth quarter, along with a 67% year-over-year increase in revenue.
Two things really set it apart from most competitors. For one, it is a fintech that has a bank charter, which it received in February. So now it can hold deposits, originate loans in-house, and it doesn't have to share revenue with bank partners. It can also set its own interest rates. With interest rates set to increase, SoFi should start to see revenue from interest income rise over time.
The other thing that sets SoFi apart is its banking-as-a-service business, which it acquired when it bought Galileo in 2020 and bolstered just this month with the acquisition of Technisys. Through this business, it helps other companies build out their own digital banking business.
The combination of Technisys' platform with Galileo will support multiple products including checking, savings, deposits, lending, and credit cards through application programming interfaces. It will help SoFi meet the expanding needs of its current partners and reach new ones. SoFi has the lofty goal of becoming the Amazon Web Services of fintech with its one-stop-shop financial services platform.
2. LendingClub, $14.24 per share
LendingClub (LC -0.12%) is quite similar to SoFi in that it is also a digital lender that uses artificial intelligence and machine-learning models to make lending decisions. It also has a bank charter, which it acquired through the 2020 purchase of Radius Bank. They are two of just a handful of fintechs that have a bank charter.
But LendingClub is different from SoFi in that it offers a peer-to-peer digital lending marketplace for individuals and businesses to get loans from one another. It generates fees from the members who use the marketplace.
Also like SoFi, it has had tremendous growth and saw its stock price soar some 275% -- from around $12 at the start of 2021 to around $45 in early November. While LendingClub got caught in the sell-off that started last fall, it was not as overvalued as many other growth stocks. In fact, it is pretty cheap right now with a price-to-sales (P/S) ratio of around 2 and a forward price-to-earnings ratio of 12.
LendingClub is trading at around $14.24 per share, down 41% year to date. But analysts are bullish on the stock, with a median price target of $30 per share in the next 12 months, which would be a 100% gain from its current level.
While its stock price has tanked, LendingClub posted another strong performance in the fourth quarter with record revenue of $262 million, up 247% year over year. It generated $179 million in noninterest income from its marketplace and $83 million in interest income from its loans, up 27% from the last quarter. Most of its loans are installment loans for credit card debt, home mortgages, personal loans, auto refinancing, student loans, and other purposes. The company turned a profit for the third consecutive quarter with net income of $29 million.
As it ramps up its lending operating with its new bank charter, LendingClub should see continued growth in net interest income, particularly with interest rates rising and opportunities to cross-promote within its large peer-to-peer marketplace. The company has an outlook for $1.1 billion to $1.2 billion in revenue in 2022, up from $816 million in 2021, and net income of $130 million to $150 million for 2022.
These two very similar fintechs have great upside potential and are priced extremely low right now.
