Why SoFi Stock climbed 26% in October

What happened

SoFi Technologies (NASDAQ: SOFI) was so good in October, as the share price jumped 26.2% in the month, according to S&P Global Market Intelligence.

The fintech company blew up the S&P 500, which had a solid month, up 6.9%. SoFi is currently trading at around $ 23 per share and is up 85% year-to-date.

Image source: Getty Images.

So what

SoFi is a newcomer to the market, having gone public in June through a special purpose acquisition company. SoFi is an online personal finance company that started in 2011 as a student loan lender, but has since expanded into banking services, personal loans, credit cards, mortgages, personal finance tools and to investment. Everything is done via the SoFi mobile application.

SoFi has grown rapidly, with its user / member count reaching around 2.6 million at the end of the second quarter, a double year-over-year increase and more than triple from 759,000 in the second quarter of 2019. Revenue gains followed as revenue was up 101% year-over-year to $ 231.3 million. Third quarter figures will be released on November 10.

SoFi has three lines of business: lending, financial services, and technology. Lending activity is the largest, accounting for $ 166.3 million in revenue in the second quarter. The financial services business includes investing, credit cards, personal finance, direct deposit, employee benefits and other services. Through the technology activity, SoFi is helping other businesses with their own digital banking products, through its acquisition of Galileo last year.

What could take this young company to the next level is a banking charter, which it requested last year and which should be granted by the end of 2021. A banking charter would allow SoFi to expand its capacities, allowing it to take deposits and expand its loan offer, among other things.

Now what

The October surge may be related to a few factors, the main one being SoFi’s rapid growth. But also, the company offered $ 1.1 billion in senior convertible notes to institutional investors on September 29 to raise capital for future expansion, likely linked to the impending banking charter. Additionally, on October 18, SoFi announced a partnership with Pagaya Technologies, a company that provides proprietary artificial intelligence and machine learning to fintechs and banks to reduce risk for lenders and better inform credit decisions. SoFi will offer loans through Pagaya’s AI network. In addition, SoFi launched a new advertising campaign in late September, Move Your Money, targeting NFL and college football audiences.

The stock also climbed on October 29 when Loan Club, a fintech similar to SoFi, bank-chartered, posted record third quarter profits. Investors may have seen this as a good sign for SoFi.

The company has a lot of momentum and that is expected to continue next week after SoFi announces third quarter results, followed by the expected grant of its banking charter in the fourth quarter.

This article represents the opinion of the author, who may disagree with the “official” recommendation position of a premium Motley Fool consulting service. We are heterogeneous! Challenging an investment thesis – even one of our own – helps us all to think critically about investing and make decisions that help us become smarter, happier, and richer.

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