Fintech businesses had a rotten, no-good year in 2022, but SoFi Technologies' (SOFI -0.13%) 12-month journey seemed especially perilous. Unlike traditional big banks, SoFi was in the crosshairs of two particularly downtrodden market sectors: technology and financials.
It will, without a doubt, be painful for investors to look back at the past year and take stock of the damage done to SoFi Technologies stock. But 2023's story hasn't been written yet, and just maybe, shareholders are in a hole so deep that there's nowhere to go now but up.
A heavy bag to hold
Anyone who invested $1,000 in SoFi stock in January of 2022 had unfortunate timing. The share price topped out at around $15 on Jan. 20, 2022, providing false hope after an already bruising 2021.
Even among beaten-down tech and banking stocks (or in SoFi's case, quasi-banking stocks), 2022 was especially brutal for the company. With the share price reduced from roughly $15 to $5 during the year, loyal shareholders would have turned a $1,000 stake into $333 and change.
And neither SoFi nor its investors could have foreseen a drawdown of this magnitude. It's certainly not management's fault that it did not predict Russia's invasion of Ukraine, which started a cascade of events that would exacerbate an already brewing inflation problem.
Nor could SoFi have done anything to prevent Federal Reserve Chairman Jerome Powell from tightening monetary policy to a degree that younger investors haven't witnessed in their lifetimes.
Inflation might be transitory, eventually
On top of all that, the government extended the pause in student loan repayments last year -- that's good news for struggling college students but not so great for a business that generates revenue from refinancing student loans. Still, it seems like the market has priced this into SoFi stock already, along with the Fed's rate hikes, sticky inflation, geopolitical crises, and everything else but the kitchen sink.
Thinking there's nowhere to go but up isn't a viable investment strategy. However, it might actually be a valid claim when it comes to SoFi. The federal student-loan repayment moratorium won't last forever, or even probably until the end of the year. Inflation has already come down since June 2022 and will likely head toward the Fed's 2% target over time. With that, the central bank will be under tremendous political pressure to finally tap the brakes on interest rate hikes.
Or so we can hope. At the very least, SoFi stakeholders can stand by CEO Anthony Noto (who holds an enormous position in his company's shares) and hope that the macroeconomic effects that are out of SoFi's control might get better before they get worse.
The kids are all right
Besides, an investment in SoFi was never supposed to be about quick returns. Disruptive companies often have long-term stories that play out over years, not months.
SoFi in particular aims to change how people handle personal finance, and the company's youthful target demographic (millennials and Gen Zers) will collectively control vast amounts of investable capital over the coming decades.
In other words, the present might still belong to the big banks, but if all goes according to plan, the future could belong to SoFi Technologies. Moreover, skewing young has its advantages as the company's own research indicates Gen Z investors aren't deterred by macroeconomic challenges.
Its study showed that Gen Z investors make up the "biggest group of investors reportedly wanting to invest more despite inflation." SoFi's survey also found that, despite last year's crypto winter, 78% of cryptocurrency investors "were either confident or cautiously optimistic that the crypto market will rebound in the future."
If they're not out of the investing game, should you be? Granted, staying with the stock is easier said than done for SoFi Technologies investors who saw $1,000 become $333.
The best path forward from here, perhaps, is to keep your eyes on the prize -- disruption of the banking system as we know it -- and hold your SoFi shares since the new year could see a significant improvement over 2022.
