SoFi stock price continued its strong rally this week, reaching its highest level since February 21 as sentiment improved. It has jumped by over 72% from its lowest level this year, giving it a market capitalization of over $16 billion. Let’s explore whether the SoFi share price has more upside to go.
SoFi business is growing
SoFi is one of the fastest-growing fintech companies in the United States. Its annual revenue has jumped from $565 million in 2020 to $2.6 billion last year and $2.77 billion in the trailing twelve months (TTM).
The company’s growth happened as it added more customers and its services in its ecosystem. It has also benefited from the Federal Reserve’s interest rates, which jumped from 0% during the pandemic to 4.5% today.
Subsequently, its net interest income jumped from $363 million to $2.8 billion last year and $2.9 billion in the trailing twelve months.
Most importantly, the company has moved from being a loss-making one into a highly profitable one. Its net income jumped to $498 million last year from $300 million a year earlier.
The most recent results showed that SoFi’s business continued growing in the last quarter. Its net revenue rose by 33% to $771 million, the fastest growth in four quarters.
This growth happened as the company set a new record in terms of members and products. It added a record 800,000 and 1.2 million new products.
SoFi’s net income jumped to $71 million, while its fee-based revenue jumped by 67% to $315 million, and its financial services and tech platform revenue rose to $407 million.
SoFi revenue growth and valuation
Analysts are optimistic that the company’s business will continue doing well this year since interest rates remain above average.
Data compiled by Yahoo Finance shows that the average revenue estimate for the current quarter is $801 million, a 34% annualized increase.
They also expect the next quarter’s results to be $839 million, a 21% annualized increase. For the year, SoFi will make $3.28 billion, followed by $3.92 billion in the coming one.
SoFi’s success is mostly because of the diverse solutions it offers on its platform. It is a financial supermarket offering vast services like lending, investing, insurance, credit scores, and travel solutions. It is also working on moving back to the crypto trading industry.
A key concern among investors is that the company is highly overvalued. For one, its stock price of $15 is higher than the average estimate of $14.45. Also, the company trades at high multiples, with the forward P/E ratio being at 51 and the trailing multiple being 35.
This concern is further compounded by the fact that analysts expect interest rates to start coming down soon. Analysts anticipate that rates will drop to 2% next year, which will affect its interest income.
SoFi stock price analysis
SoFi stock chart | Source: TradingView
The daily chart shows that the SoFi stock price has done well in the past few weeks as it moved from a low of $8.56 in April to a high of $15 today. It has moved to its highest level since February this year.
SoFi has moved above the 50-day and 200-day Exponential Moving Averages (EMA), a sign that bulls are in control. The MACD and the Relative Strength Index (RSI) has moved upwards and is nearing the overbought level.
Therefore, the stock will likely continue rising as bulls target the next key resistance level at $18.4, the highest level in January.
Read more: SoFi stock price technical analysis points to a 30% surge
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