the stock of SoFi Technologies (NASDAQ:SOFI) has been crushed this year after doubling last year. It's down 20% so far this year despite what looks like a pretty solid performance.
However, the tide could turn, and soon. Let's look at why SoFi stock could soar over the next five years.
Expanded businesses, lower interest rates
SoFi's core business is lending, but it has expanded into a wide range of financial services such as banking accounts and investments. Offering other services provides several benefits for SoFi.
It gives you new revenue streams, creates greater cross-platform engagement among current members, can attract new members, and what stands out now is that it protects the business from changing effects of interest rates.
Lending can be a lucrative business, but it is very sensitive to interest rates, and SoFi's lending segment has been under pressure as rates remain high.
Now that it looks like interest rates are going to start falling, the pressure should start to ease. Meanwhile, the other segments are still in growth mode and continue to represent a higher percentage of the company's total business.
The credit segment continues to grow, but the non-credit segments are growing much faster. They represented 45% of the business in the second quarter of 2024, up from 38% a year ago. As the other segments outpace loan growth, SoFi will become a more stable business, with less exposure to interest rate movements.
If the lending segment recovers with lower rates, which is how it works, investors' current concerns about the business will disappear. When you combine that with the strength of the company's expansion model, SoFi stock could explode over the next five years, and now could be a good time to buy.
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Jennifer Saibil has positions in SoFi Technologies. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
Prediction: SoFi stock will skyrocket over the next 5 years. Here's a reason why. was originally published by The Motley Fool