Investors may be undervaluing SoFi stock: Here’s why it could climb 70%

Investors might be overlooking SoFi Technologies Inc. (NASDAQ: SOFI) by evaluating it alongside traditional banks rather than recognizing its potential as a high-growth fintech company, according to an investor known as "On the Pulse." 

The unique business model of SoFi, which prioritizes the expansion of financial services over conventional lending practices, sets it apart from traditional banks and offers substantial opportunities for growth.

On the Pulse highlights that SoFi's strength lies in its ability to rapidly introduce new financial products to its customers—a capability that many investors may not fully appreciate. 

Unlike traditional banks that rely heavily on lending for profitability, SoFi focuses on expanding its suite of financial services, making it more of a tech-driven company with significant scalability potential.

This distinction is crucial, as it positions SoFi not just as another financial institution but as a fintech innovator poised to capitalize on the growing demand for diverse, digital financial services.

SoFi Technologies' strong financial performance

In its most recent quarter, SoFi Technologies reported a record revenue of $599 million, reflecting a 22% year-over-year increase. 

The company also swung to a net income of $17 million in Q2, prompting its management to raise the guidance for the full year. 

Despite these strong financials, SoFi's stock has declined more than 20% since the beginning of the year.

On the Pulse attributes this disconnect between the company's performance and its stock price to a broader market misunderstanding of SoFi's true value.

At just 2.6 times forward sales, the investor considers SoFi undervalued and sees it as a strong candidate for long-term gains.

According to On the Pulse, SoFi's intrinsic value could be as high as $13 per share, implying a potential upside of over 70% from current levels.

Wall Street's cautious stance

Despite the bullish outlook from On the Pulse, Wall Street analysts remain cautious.

SoFi added 643,000 new members in the second quarter, bringing its total to nearly 8.8 million—an impressive 41% increase compared to the same period last year.

However, analysts at KBW recently downgraded their price target for SoFi stock to $7.00, suggesting a potential downside of 15% from its current price.

In a research note, KBW expressed concerns about the acceleration of net charge-offs (NCOs), which could negatively impact the company’s financials.

The investment firm currently holds a "market perform" rating on SoFi shares, reflecting a more conservative outlook compared to On the Pulse's bullish stance.

The contrasting views between On the Pulse and Wall Street analysts highlight the complexities of evaluating a rapidly evolving company like SoFi.

While traditional metrics may not fully capture SoFi's potential, the fintech’s innovative approach and strong growth trajectory suggest that the stock could be significantly undervalued at current levels.

For investors willing to take a long-term view, SoFi could represent a compelling opportunity, with the potential for substantial gains if its business model continues to prove successful.