SoFi Technologies (SOFI -3.74%) stock climbed 47% in November according to data provided by S&P Global Market Intelligence. The online bank gave investors renewed confidence in its loan segment along with an excellent third-quarter report at the end of October. It's also benefiting from positive investor sentiment based on lower interest rates and increased market enthusiasm about the economy after the presidential election.
Everything is finally going right
SoFi has been a volatile stock since its initial public offering (IPO) a few years ago. It's exciting because it's disrupting traditional banking, and it's building relationships with a young, social-media-following clientele, but it was in the risky tech stock camp.
It's now proven itself by reporting four straight quarters of generally accepted accounting principles (GAAP) net income, and it's expecting that to continue into the future.
You would think such a feat would cement it as a market favorite, but there's been something else weighing on investor sentiment for the past few quarters. SoFi is primarily a loan company, and lending revenue has been under pressure.
Management is working to expand its platform to veer away from the concentration in lending. It's made incredible progress with its financial services segment, which increased 102% in the third quarter. It offers all kinds of digital financial services like bank accounts, investing, and insurance. The non-lending segments, which also include the tech platform business, a white-label financial infrastructure service, continue to increase as a percentage of the whole business. They accounted for 49% of total adjusted net revenue in the third quarter.
Lending is still the core business though, and management was warning that it would come in below 2023 levels for most of the year. It's also been responsible for most of the profits, and this all put investors on edge.
SoFi got a boost from investor confidence after interest rates were cut, and it also updated shareholders in the third-quarter report that it now expects the lending business to be at least as high as 2023 levels.
SoFi has massive potential
SoFi continues to grow its platform at a rapid pace. It added 756,000 new members in the third quarter and 1.1 million products. It's expanding into new products and services, and its younger consumer base should drive growth for the company for the foreseeable future. It's also now sustainably profitable.
It's not surprising that the market rewarded it with a high jump for the good news after sending it down for most of the year. It's in excellent shape to keep up strong performance and continue to reward investors.
