Stock Market

Is SOFI Stock Worth the Risk?

Will app-based bank SoFi Technologies (NASDAQ:SOFI) go down the tubes during the financial sector meltdown of 2023? Or, will SOFI stock stage a jaw-dropping recovery amid the chaos? Investing in SoFi Technologies certainly isn’t risk-free, but the potential payoff could be astounding.

It may be tempting to lump SoFi Technologies in with some failing regional banks. Is it really fair, though, to compare to SoFi to SVB Financial (OTCMKTS:SIVBQ) subsidiary Silicon Valley Bank and Signature Bank (OTCMKTS:SBNY)?

Before you pronounce judgment on SoFi Technologies, consider the company’s recent actions to keep its depositors’ funds secure. In the final analysis, SoFi’s reward-to-risk profile is much more favorable than the company’s constant critics believe it is.

What’s Happening With SOFI Stock?

SOFI stock lost some value in March, falling from $6.50 to $6. That wasn’t a terrible decline for a stock that’s known to be volatile, though. Besides, the banking crisis happened in March, so SoFi Technologies’ investors were bound to sustain some collateral damage.

The rest of 2023 could be spectacular for SoFi Technologies, especially if the Federal Reserve eases up on its interest rate hikes. After all, tight monetary policy, and the challenging lending conditions that go with it, is what caused so many financial stocks to go into free fall last year.

On March 31, a data point came out that a lot of financial traders probably ignored. Specifically, February’s core personal consumption expenditures (PCE) index rose 4.6% year over year. This is the Fed’s preferred inflation gauge, and it came in below Wall Street’s estimate.

If the Fed needed a green light to tap the brakes on interest rate hikes, this is it. And if inflation is cooling and monetary policy loosens in the coming months, SoFi Technologies could potentially deliver several quarters of terrific financial results.

Amid the Crisis, SoFi Technologies Steps Up to the Plate

Words are fine, but action is what investors should want to see during the current regional banking meltdown. Fortunately, SoFi Technologies is taking swift action in protecting the company’s well-capitalized customers.

In particular, SoFi Technologies announced that its “SoFi Checking and Savings members will be able to protect their deposits with access to up to $2 million” of Federal Deposit Insurance Corporation (FDIC) insurance.

$250,000 worth of FDIC deposit protection per account is the industry standard. Thus, SoFi Technologies is demonstrating its responsiveness to the concerns of skittish bankers.

Don’t be surprised if more banks follow in SoFi Technologies’ footsteps with this bold move. Someday, $2 million worth of FDIC deposit protection per account might become the industry standard — and customers will remember SoFi as the bank that spearheaded the trend.

So, Is SOFI Stock Worth the Risk?

There’s always the risk that SoFi Technologies won’t be able to compete against larger, more established banks. Hence, any share position in SoFi should be moderately sized.

That said, I’m really impressed with SoFi Technologies’ commitment to protecting its depositors. Besides, a potential easing of tight monetary policy this year could give SoFi a huge boost. Truly, this is a great time to consider adding SOFI stock to your portfolio as the possible rewards greatly outweigh the risks.

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 Publishing Guidelines.

David Moadel has provided compelling content – and crossed the occasional line – on behalf of Motley Fool, Crush the Street, Market Realist, TalkMarkets, TipRanks, Benzinga, and (of course) He also serves as the chief analyst and market researcher for Portfolio Wealth Global and hosts the popular financial YouTube channel Looking at the Markets.

Articles You May Like

Warren Buffett’s Berkshire Hathaway trims its stake in Chinese EV maker BYD to 6.9%
3 Penny Stocks Poised to Turn Pocket Change Into a Small Fortune by 2028
3 Robotics Stocks to Buy Now: June 2024
3 Airline Stocks to Buy Now: June 2024
There Are Better Picks to Enjoy the Fruits of AI Than Apple Stock