Investors weren’t enamored with app-based bank SoFi Technologies (NASDAQ:SOFI) in 2022, but 2023 offers an opportunity for SOFI stock to bounce back. Indeed, if one analyst is right about his forecast, SoFi Technologies’ loyal shareholders could enjoy substantial returns over the next 12 months.
It might seem like everybody and his uncle has sold off their shares of SoFi Technologies. Yet, that’s definitely not the case. For one thing, SoFi Technologies CEO Anthony Noto reportedly added to his share position in the company. Also, Soros Fund Management founder George Soros was, and may still be, among SoFi’s large-scale investors.
So, are you ready to jump into the trade? There are risks involved, no doubt, but SoFi Technologies has the makings of a surprise winner this year.
Profitability Is Key to Success for SoFi Technologies
What will propel SoFi to profitability, and how long will it take the company to get there? Earning a banking charter certainly will help SoFi Technologies earn revenue and gain credibility. However, a significant quote from Noto adds more details to SoFi’s turnaround story.
Citing SoFi Technologies’ “continued strong growth and significant improvement in GAAP net income margin,” Noto claims that these factors position the company “very well in 2023 for another year of significant revenue and EBITDA growth and for reaching GAAP net income profitability in the fourth quarter.” This is a profound statement for investors who have, thus far, been frustrated with SoFi’s net earnings losses.
Noto’s points are well noted. SoFi Technologies increased its membership count by 51% year over year (YOY) during 2022’s fourth quarter. Also during that quarter, SoFi achieved very impressive GAAP net income margin of 42%. Additionally, the company’s net earnings loss shrank.
SOFI Stock Gets an Upgrade and Price Target Raise
Meanwhile, at least one expert on Wall Street is optimistic about SoFi Technology’s future prospects. To be specific, Mizuho analyst Dan Dolev reiterated a “buy” rating on SOFI stock while raising his price target on the stock from $6 to $9.
That’s a 50% price target increase, but it may be justified based on SoFi’s potential path to profitability. Moreover, Dolev reportedly feels that the rising interest rate environment could actually benefit SoFi Technologies.
How might rising rates work in SoFi’s favor? Bear in mind, banks like SoFi Technologies generate revenue from interest on loans. Higher interest rates, therefore, can translate to more revenue coming in.
Granted, elevated interest rates can also discourage people and businesses from taking out loans in the first place. In the coming months, and especially when SoFi Technologies releases earnings reports throughout the year, investors will find out whether SoFi is able to parlay rising rates into better top- and bottom-line results.
What You Can Do Now
A comeback certainly isn’t guaranteed, but investors should consider the possibility that SoFi Technologies will become profitable this year. It would certainly mark a watershed moment for this disruptive fintech firm.
If that happens, Dolev’s $9 price target should be achievable. Hence, risk-tolerant traders can choose to accumulate a few shares of SOFI stock now, while they’re still relatively cheap.
On the date of publication, David Moadel 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.