SoFi Stock: Is It a Good Investment for You Right Now?
SoFi Technologies (NASDAQ: SOFI) had investors buzzing with excitement after management released its second 2023 earnings report on July 31. The stock soared nearly 20% as the reported revenue and earnings exceeded analysts' expectations Seeing how well the fintech bank performed this year despite recent financial institution failures and the subsequent extreme volatility among banking stocks is incredible. As of July 31, 2023, the stock was up a whopping 148% for the year. But with such an impressive run over the first half of the year, you might wonder whether it's still a wise investment or if the market is now overvaluing this high-flying fintech bank. Fear not, dear reader, as this article will dive into whether or not the stock is still worth buying.
SoFi's lending segment works on a gain-on-sale model, which means it creates the loans and then sells them shortly after to large financial institutions, such as bank-holding companies, instead of keeping them on its balance sheet and earning interest.
The disadvantage of this model is the risk of a financial contagion disrupting the gain-on-sale loan market or negatively impacting one of Sofi's large loan purchasers. Financial contagion is when a financial crisis spreads from one market or region to another. It can occur at domestic and international levels and disrupt financial institutions across markets connected by monetary and economic systems.
Source Fool.com
