SoFi Technologies (NASDAQ:SOFI) offers a one-stop solution for all banking and finance needs. Despite having a strong advantage over other financial technology (fintech) companies, it has had a few difficult months. SOFI stock was trading at $25 in February 2021 and as we inch closer to February this year, it is trading around $13.
The stock is down more than 14% in the past six months, but the recent news of its bank charter approval will help the stock rebound. SoFi was awaiting approval after its acquisition of Golden Pacific Bancorp for a long time, and it has cleared the final hurdle to become a bank.
This could change the future of the company, and early investors will benefit from the growth of SOFI stock. With that in mind, let’s dig deeper into my investment thesis for SoFi.
The Bank Charter Is A Huge Move
With the bank charter, SoFi will be able to hold deposits and use them to fund loans. It is a huge deal for the company because several fintech companies in the industry do not have a banking license, and it is not easy to get one.
As the deal closes, the company will have $150 billion in assets, which will help improve the operations. In addition to other benefits, it will also allow SoFi to have a better framework for holding the loans on its balance sheet.
The company will also have low interest expenses. SoFi will be able to save money on the interest it pays on the debt to fund its assets like loans.
Once the deal is closed in February, SoFi will be able to hold loans on the balance sheet and collect interest payments. This will help its bottom line. As long as the loans do not go into default, the company will be able to make them more profitable as years go by.
SoFi Technologies could be seen as a leader in the fintech world and we may see many such deals in the coming years. Additionally, the bank charter proves the credibility of the company in the industry. It is a signal that SOFI stock is trustworthy and has a long way to go.
Investors should see this news as a positive catalyst because this fintech company is here to change how you handle your money. We have yet to see how the company holds its loans and makes money from them, but this is a good start.
The Bottom Line on SOFI Stock
It is not easy for any company to obtain a bank charter, and SoFi had to deal with several regulatory issues. However, it has finally made it to this stage, which has the potential to transform the future of the company. SoFi will have higher revenue and earnings in 2022, and this is only the beginning.
We will soon get to know more about the company’s projections for the coming year. But for now, SOFI stock looks like a solid bet. It is trading at a discount and is a long-term buy and hold.
The current decline in the stock is not specific to the company, since several growth companies have seen a dip due to fears of rising interest rates and inflation. It will impact the business, but each company will handle the situation differently.
When looking at SoFi, consider the business model and its efficiency in meeting the needs of all types of users. The company could change the way we handle money and investments, and it is only going to make borrowing easier for users. Buy the dip in SOFI stock, as the coming year could be massive for the company.
On the date of publication, Vandita Jadeja did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
Vandita Jadeja is a CPA and a freelance financial copywriter who loves to read and write about stocks. She believes in buying and holding for long term gains. Her knowledge of words and numbers helps her write clear stock analysis.
