The stock of SoFi Technologies (NASDAQ: SOFI) has been crushed this year after doubling last year. It's down 20% year to date despite what seems like pretty solid performance.
However, the tide might turn, and soon. Let's see why SoFi stock could soar over the next five years.
Expanded business, lower interest rates
SoFi's main business is lending, but it has expanded into a large array of financial services like bank accounts and investments. Offering other services provides several benefits for SoFi.
It gives it new revenue sources, it creates greater cross-platform engagement among current members, it can attract new members, and -- what stands out now -- is that it shields the business from the changing effects of interest rates.
Lending can be a lucrative business, but it's highly sensitive to interest rates, and SoFi's lending segment has been under pressure as rates remain high.
Now that interest rates look like they're going to start coming down, the pressure should begin to ease. Meanwhile, the other segments are still in growth mode, and they continue to account for a higher percentage of the company's overall business.
The lending segment continues to grow, but the non-lending segments are growing much faster. They accounted for 45% of the business in the 2024 second quarter, up from 38% a year ago. As the other segments outpace lending growth, SoFi will become a more stable business, with lower exposure to interest rate movement.
If the lending segment picks up with lower rates, which is how the segment works, investors' current concerns about the business will fall away. When you combine that with the strength in the company's expansion model, SoFi stock could explode over the next five years, and now could be a great time to buy in.
Should you invest $1,000 in SoFi Technologies right now?
Before you buy stock in SoFi Technologies, consider this:
The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and SoFi Technologies wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.
Consider when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you’d have $743,952!*
Stock Advisor provides investors with an easy-to-follow blueprint for success, including guidance on building a portfolio, regular updates from analysts, and two new stock picks each month. The Stock Advisor service has more than quadrupled the return of S&P 500 since 2002*.
*Stock Advisor returns as of September 23, 2024
Jennifer Saibil has positions in SoFi Technologies. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
Prediction: SoFi Stock Will Soar Over the Next 5 Years. Here's 1 Reason Why. was originally published by The Motley Fool