By
Andy Watson
April 5th, 2024
The company’s 2.56 million members, as recorded in its last quarterly report show that its closed market system is working.
American online personal finance company SoFi Technologies Inc (NASDAQ: SOFI) currently stands as one of the fastest-growing tech stocks in the United States today as pointed out by Market analyst, Leo Imasuen. Key performance metrics point to the company’s brewing growth momentum, judging from its high Price-to-Sales (PS) ratio of 13.14x, the analyst believes this figure may not be sustainable in the long run, except obvious risks are handled.
Amongst the major highlights that Imasuen pointed out could stump the company’s growth is the current global outlook and the inherent economic impacts, it will usher in the nearest future.
“A PS ratio greater than 10 is quite high for a financial services company,” he said, noting that “this sets the backdrop for a downward revaluation against a broader macro environment punctuated by fear and rising volatility. From the ongoing energy crisis to global supply chain constraints to rising supply-side inflation, the unfortunate foundations for a downward market seem to be building.”
Imasuen also said global economic strains that have shown to strain the United States economy are historically known to suppress growth stocks, a trend that may be experienced even for SoFi. According to him, any protracted sell-off might reset the PS ratio to a mid to high single-digit figure that will push the company’s market capitalization down by about 25%.
The San Francisco-based firm wants to be a one-stop-shop for all things finance. The company currently offers a wide variety of personal finance services ranging from loans to investment in stock as well as digital currencies such as Bitcoin (BTC), Ethereum (ETH), Litecoin (LTC), Polkadot (DOT), amongst others. Imasuen noted that while these diversified product offerings can be a basis to drive massive customer engagement, the failure of the strategy may further stump its longer-term growth prospects.
Market Analyst on SoFi: Dealing with Competitors
There is so much future uptrend in the fintech world, with many new market players projected to move into the space in the coming years. While these new startups are going to be a major competitor for SoFi, current market players are also rebranding their product offerings to capture a reasonable number of customers.
For SoFi to continue on its growth trends, Imasuen pointed out that the company must remain innovative in order to battle with its competitors.
“Of course wider competition concerns from both traditional banking incumbents and new startups all vying for a slice of the fintech pie plays into the bearish narrative. You simply cannot exist alone in a space with so much future growth. This further highlights the importance of SoFi’s closed-loop system in keeping members engaged and off the market,” he said.
The company’s 2.56 million members, as recorded in its last quarterly report show that its closed market system is working. However, there are a whole lot more products the company will need to introduce so as to keep its customers out of the open market in search of products SoFi does not offer.
