The Nasdaq Composite index has been on fire. As of this writing, it has surged 57% since the start of 2023, and it's up about 9% just this year. Investors are showing bullish sentiment as they are optimistic about the state of the economy.
You might think, therefore, that there aren't attractive buying opportunities. But that's just not true. Investors can certainly find compelling businesses.
Here's one no-brainer growth stock to buy right now with $100 and hold through 2024 and beyond.
Disrupting the financial services industry
Anytime a business attempts to innovate in an outdated and consumer-unfriendly industry, layering on technology and digital tools in the process, there's a chance for something positive to happen. That's exactly what SoFi Technologies (SOFI 0.31%) has done. The online-only banking provider has over 7.5 million customers now. That's up 44% year over year, and it's fourfold higher than just three years ago.
In the hyper-competitive financial services industry, SoFi has carved out a successful niche by providing a superior user experience. It also helps that the business targets a younger, digitally savvy, and more affluent customer base.
That last point matters. Management says that the average income and FICO score of its student loan borrowers is $154,000 and 781, respectively. All banking service providers experience cyclicality, but SoFi should in theory be better able to navigate any economic downturns, as its customers could continue making payments on time.
There's a clear indicator of how well SoFi has been performing. As of Dec. 31, the business had deposits of $18.6 billion. That figure was up more than 150% versus 12 months earlier. During a period of time that included the regional banking crisis, SoFi appears to have won the trust of customers looking for a safe place to park their savings. This provides low-cost funding to fuel loan growth.
NASDAQ: SOFI
Key Data Points
Evolving into a sustainable business
Like most businesses that are focused on growth, SoFi has historically not prioritized profitability. Spending aggressively on technology and product development, as well as sales and marketing, was the key focus to introduce new features and bring on new customers. That strategy clearly worked.
To be clear, SoFi isn't done growing. Management expects revenue to rise 20% to 25% annually during the next three years. In other words, if past trends continue for the foreseeable future, this will be a much larger enterprise, with many more customers.
However, investors can expect to also see soaring profits in the years to come. After generating its first quarter of positive net income in Q4, the leadership team believes SoFi will report earnings per share of $0.55 to $0.80 in 2026, compared to a loss per share of $0.36 last year. Investors will want to pay very close attention to fresh earnings reports to make sure that this becomes a reality.
Buy the dip
Investors with $100 ready to put to work can definitely get their portfolios on the right track. It's a smart move to buy the dip on SoFi, which is 72% below its peak price set in February 2021. The stock benefited greatly during the pandemic-related bull market. But now, investor excitement has cooled a bit.
There's a heightened focus on fundamentals these days. That's not a bad thing, as SoFi's underlying business appears to be strengthening with each passing quarter and year. That's why the current price-to-sales multiple of 3.3 looks quite attractive given the company's growth potential and expectations of surging profits.
During the next five to 10 years, SoFi stock could turn out to be a huge winner.
