Are you afraid to invest in the banking sector in 2023? There’s no need to be, as app-based bank SoFi Technologies (NASDAQ:SOFI) is quite different from its competitors. Naturally, SOFI stock will have its ups and downs this year. Yet, there are multiple reasons to expect SoFi Technologies to deliver outstanding value to its shareholders.
Don’t get the wrong idea — you’re not supposed to pour your entire brokerage account into shares of SoFi Technologies. Instead, just consider the following potential turnaround drivers as SoFi Technologies continues to set itself apart from run-of-the-mill financial institutions.
SoFi Technologies Could Prevail in the Student Loan Saga
Here’s a news item that has grabbed the headlines recently. In March 2020, the U.S. government enacted a moratorium on required federal student loan repayments. Recently, the White House has sought to cancel up to $20,000 worth of student debt for some borrowers. However, SoFi Technologies is fighting this in court.
It’s a high-stakes legal battle because some of SoFi Technologies’ revenue comes from refinancing student loans. As InvestorPlace Assistant News Writer Eddie Pan reported, Chief Justice John Roberts and Supreme Court justices have “raised questions” about the White House’s “plans to forgive billions of dollars in federal student debt.”
Thus, there’s high-level resistance to student loan forgiveness. SoFi Technologies is pushing back, as well. The company filed a lawsuit in federal court against the Department of Education, over the student loan repayment pause. If SoFi Technologies prevails, there could be a huge relief rally in SOFI stock.
Improving Financials Should Keep SOFI Stock Afloat
Is the fact that SoFi Technologies isn’t currently profitable a deal-breaker for you? It shouldn’t be, as the company is making strides in this area and could potentially be net income positive in the near future.
Consider this: SoFi Technologies’ fourth-quarter 2022 $40 million GAAP net earnings loss indicates a 64% improvement compared to the prior-year quarter’s $111 million net loss. Not only that, but the company’s full-year 2022 net loss signifies a 34% improvement over 2021’s net loss.
It seems like the market doesn’t fully appreciate SoFi’s bottom-line momentum. CEO Anthony Noto has openly targeted “GAAP net income profitability in the fourth quarter,” and this would represent a major milestone for SoFi Technologies. If and when the company achieves this, sell-side traders shouldn’t be able to keep SOFI stock down for too much longer.
SoFi Technologies Appeals to Young Bankers
It’s not easy to get older customers to change banks if they’re set in their ways. However, SoFi Technologies is capturing the attention of younger millennial and zoomer bankers. It’s a smart strategy that should benefit all stakeholders this year.
SoFi’s research found that Generation Z makes up the “biggest group of investors reportedly wanting to invest more despite inflation.” Since SoFi Technologies is a bona fide bank with a national bank charter, the company is free to court younger consumers, not just as an app but as a legitimate financial firm.
As DBS analyst Manyi Lu explains, SoFi Technologies offers “low fees, [a] competitive rate, and user-friendly apps.” Consequently, the company is “well positioned to attract customers from traditional banks and generate revenue by providing full banking services.” A variety of value-added services (vaults, emergency funds, roundups, no-fee overdraft coverage and more) should entice many more youthful bankers and their capital to SoFi Technologies this year.
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.