The share price of SoFi Technologies (SOFI 4.48%) fell 12% in December, according to data provided by S&P Global Market Intelligence. There was no specific news that sent the stock down, but it is trading at a premium valuation, and it may have been impacted by falling cryptocurrency prices during the month.
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A huge opportunity in financial disruption
SoFi has become a popular banking app for its target student and young professional users. It aims to offer everything a client needs to manage their finances all in one place, and it's adding new products and services to make that happen. But it's doing even more than that, rolling out innovations that make it stand out from the large pack of both traditional and digital banks.
This model is resonating with its core clients, and they're signing up at a rapid pace. SoFi continues to break its own records for new customer additions every quarter, with 905,000 in the third quarter, representing a 30% year-over-year increase. Adjusted net revenue increased 38% year over year in the third quarter, and SoFi is now sustainably profitable, with $0.11 in adjusted earnings per share in the quarter, up from $0.05 last year.
It's also adding more products, which is part of its growth strategy. Management said it envisions customers who are just starting out on their financial management journeys opting for a single service and then growing with SoFi, adding more products over time. Once they're in the SoFi ecosystem, they deepen their engagement, offering more growth opportunities over time from each customer.
As interest rates have come down, its lending business, which is its core business, is also flourishing. However, its largest opportunities are in the financial services segment, which includes the non-lending products. Financial services revenue increased 76% year over year in the third quarter, and contribution profit was up 126%.
NASDAQ: SOFI
Key Data Points
Don't get confused by short-term movements
There will always be ups and downs on any stock journey, and investors shouldn't be alarmed that SoFi stock fell in December. It's performing beautifully and releasing new products that investors like to see, such as cryptocurrency trading and a SoFi stablecoin. That may have contributed to the drop last month, as cryptocurrencies have been falling, and adjacent stocks have also been impacted.
SoFi stock is also fairly expensive, trading at 53 times trailing 12-month earnings and 4 times book value, but it deserves a premium for its performance and prospects. If you have a long time horizon, you can consider buying at the current price.
