justin sullivan

Sofia (NASDAQ: SOFI) is my favorite cheap fintech stock to buy right now, as SoFi shares are trading just above key $5 support levels.

So much has changed since I posted my previous post about a potential SoFi short. squeeze during the Super Bowl.

SoFi shares are down 60% year-to-date and now is a good time to get in on the action just before the federal student loan repayment pause is lifted.

SOFI given by Y-Charts

In this article, I will provide updates on SoFi’s progress and why I think the stock is too cheap at these current prices.

SoFi Commercial Update

SoFi reached important milestones during its last Q2 2022 Results Update. The company surpassed the 4 million member mark with 4.3 million active accounts and achieved record revenue of $363 million (up 57% YoY). Revenue reached 6.6 million and management raised its full-year guidance for the remainder of 2022.

Q2 SoFI Membership Growth

SoFi Membership Growth (SoFi)

Net losses improved to $95 million as the company moves toward profitability. EPS was negative 12 cents per share (vs. -48 cents per share in Q2 2021).

SoFi generates revenue from two segments: lending products and financial services. While the financial services segment performed well (up 100% year-on-year to 5.4 million), SoFi struggled with the federal suspension of student loan repayments in terms of revenue.

Personal loans made up the bulk of revenue in the second quarter of 2022, while student loans received were hit hard.

Origin of the Q2 2022 SoFI loan

Origin of the loan for SoFi Q2 2022 (SoFi)

The company hit a record $2.5 billion in personal loans as Americans borrow money in droves to meet rising costs and inflation.

Student loan origination decreased by 52% due to the student loan moratorium.

Despite short-lived headwinds, SoFi remains a strong fintech company with a robust 2.0% APY on checking and savings accounts (nearly 66 times the national average).


SoFiAPY (SoFi)

Financial services revenue will continue to grow alongside membership growth, but the student loan segment is expected to recover next year after losing ground due to federal student loan repayment pauses.

Student Loan Repayment Pause Ends Soon

According to White Housethe student loan repayment pause will officially end on December 31, 2022.

US President Joe Biden has proposed a student loan forgiveness program of up to $20,000 for Pell Grant recipients and $10,000 for non-Pell Grant recipients.

This is good news for SoFi, as the company will start collecting revenue based on when the Department of Education starts processing these requests.

The bad news is that the US government needs to revive the print media and further dilute the US dollar and impose a greater burden on taxpayers to make this plan a success.

Justin Herbert deal details

SoFi signed NFL QB Justin Herbert from the LA Chargers to a 3-year sponsorship deal and offered him a stake in the business.

This is another positive sign for SoFi, as the company wants to target young adults traditionally overlooked by traditional banks.

Herbert is entering his 3rd year in the NFL and is one of the best young players in the league.

My bullish grip

SoFi will likely disrupt legacy banking in due course, so it’s a simple buy and hold for me.

The company has $707 million in cash and is already generating positive EBITDA. Growth has been slow and steady as more young professionals migrate from Bank of America, Chase and Wells Fargo to SoFi Money.

SoFi trades at a P/S ratio of 4.23, which is quite a bit more than its competitors.

Fintech stocks by price/sales ratio

Company P/S ratio
SoFi (SOFI) 4.23
PayPal (PYPL) 4.06
Block (SQ) 2.18
Beginner (UPST) 2.18

The entire fintech sector has been crushed and many of these stocks are on sale.

At less than $7 per share, I believe a lot of the risk has been mitigated.

There is clear long-term tech support near the $5 mark for SoFi and I think the company has held up well in such tough economic times.

Long-term SoFI support

$5 Long Term SoFi Support (TradingView)

Below $6 was a better entry point, but SoFi shares could soar if CPI inflation slows and investors pump funds back into the market.

I wouldn’t worry about SoFi shares being overvalued at more than $6, as much of the student loan repayment pause has been priced into the stock price.

Risk factors

I’m bullish on SoFi but there are several risk factors at play.

  • Member growth slows in the future
  • Federal student loan repayment pause extended indefinitely and SoFi struggles to grow student loan volume
  • SoFi announces market offering to raise funds and dilute shareholders
  • Traditional banks are offering a similar product offering with 2%+ APY to lure customers away from SoFi
  • SoFi’s short interest is around 15% and continues to grow as short sellers can continue to bet against the stock.

As long as SoFi is running, aspirations can relax for the time being.


If you’re big on SoFi stocks, my suggestion is to take a long-term view and forget about SoFi stocks for the next two years.

I hedge these cheap growth stocks under $10 because they remind me of Amazon (AMZN) and Netflix (NFLX) in their early days.

Disruption takes time and eventually people will flock to the best business product. SoFi offers a superior check and savings product with attractive returns, so investors just have to wait for the masses to join in.