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US President Joe Biden will decide whether to write off any new student debt. He has already canceled $400 billion in student loans; therefore, there is hope that more help is around the corner. In addition, US Education Secretary Miguel Cardona said the government could extend student loan payment break after August 31. These two initiatives put pressure on Sofi Technologies (NASDAQ:SOFI) stock, down more than 65% in the year so far.
In addition, inflation continues to hammer the local economy. The Federal Reserve will continue to try and they have seven interest rate hikes expected to help contain the highest inflation in 40 years. But until things normalize, growth stocks will remain under pressure.
Student loan originations were once the crown jewel of SoFi’s portfolio. In 2018 and 2019, student loans accounted for more than half of total originations. SoFi doesn’t have detailed data prior to 2019, so we don’t have a clear trend. However, some data shows that student loans were becoming the largest part of SoFi’s loan portfolio before the Covid-19 pandemic.
But since then, the lending company has taken active steps to ensure it has a diversified portfolio. SoFi has grown beyond its origins in student loans. If you look at their performance indicators, you will notice that. The revenue and user base continue to grow exponentially, despite short-term headwinds. Therefore, you can afford to ignore bearish calls and invest in SOFI stocks.
|SOFI||SoFi Technologies, Inc.||$6.21|
SoFi is looking for ways to stay competitive
SoFi provides various financial products and services, from loans to mortgages. This allows them to reach more customers. The more customers they have, the greater their profits. The higher the profit, the higher the value of the business will be. A few months ago, it shifted mainly from student loans to personal and home loans. This generously reimbursed the company.
The company has experienced impressive growth with a 49% increase in turnover, which was much better than expected. Per-share losses topped the estimated net loss by 14 cents and narrowed to just $110 million in the first quarter of this year, much better than last year’s net loss of $177.5 million. at the same period.
Based on the results, it is evident that customers are investing in the company’s products. The company has seen 408,000 new members and 689,000 additional products were added to its range.
Second, they introduced a range of new financial products to members. This means you can get everything you might need from one organization. It is also moving forward with plans to acquire other companies in the sector.
SoFi acquired the Galileo payment processing platform in 2020. This platform allows SoFi to take financial offers beyond lending, as you can now power other companies’ cards and ACH payments through its APIs.
Technisys adds another strategic advantage, which helps SoFi in its goal of become a one-stop-shop for all your financial needs. Technisys’ new technology also complements Galileo’s services.
Keep an eye on the reverse stock split
It seems there is a different investment theme every year. To be clear, ad hoc acquisition companies have been around for decades, but in 2020 it became all about them. They work as vehicles to bring companies to the stock market and we’ll see how they continue to spread over the years. Last year, it was stocks of electric vehicles.
This year, the big technology stocks have been gravitating towards reverse stock splits.
There are two types of stock splits: prorated and reverse. A pro rata stock split is when the company divides its shares into multiple shares, while a reverse stock split is when the number of shares is reduced to increase their value.
Reverse stock splits do not change what shareholders own or the overall market capitalization of the company. However, it allows retail investors to buy high-tech stocks at a more affordable price.
SoFi also plans to follow in the footsteps of many of its tech contemporaries. A filing mentions that any form of consolidation could lead to a reduction in the number of shares outstanding in a ratio ranging from one to two to one to 10. This is something to watch out for as it will lead to a large pop in the short term if it happens.
SoFi Stock is trading at a bargain price
Trading at discounted prices, SoFi is an excellent investment opportunity for those looking for good returns in the future.
The student loan moratorium is a temporary measure that will not last long. To ease the burden of the student debt crisis, the federal government has authorized funding agencies to suspend the granting of loans. This decision will not solve the problem. At some point, normal service will resume and tens of billions of dollars in student loans will continue to be issued each year.
However, SoFi has taken proactive measures to ensure the diversification of its portfolio. SoFi’s aggressive approach to implementing artificial intelligence has helped them avoid the risks faced by other companies. So the pros outweigh the cons when investing in SoFi stocks.
At the date of publication, Faizan Farooque did not hold (neither directly nor indirectly) any position in the securities mentioned in this article. The opinions expressed in this article are those of the author, subject to the InvestorPlace.com Publication guidelines.
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.