SoFi Stock: Buy Before Oct. 27 Earnings?

As the third quarter draws to a close, attention turns to bank earnings, with SoFi Technologies (NASDAQ: SOFI) being a key entity to monitor. SoFi, a fintech firm that acquired a bank charter in 2022, benefits from directly handling deposits and funding its own loans, unlike its previous reliance on third-party partners. This operational shift allows for better rates on loans and deposits.

While lacking physical branches, SoFi incurs higher marketing and technology costs. However, its operating margin is improving, reaching 16.9% in Q2, up from 13.1% a year prior. This efficiency, coupled with competitive rates, has fueled a surge in its customer base. In the most recent quarter, SoFi's members grew by 35% to 15.8 million, and products increased by 42% to 24.4 million.

SoFi is scheduled to report its third-quarter results on October 27. The stock, down 34% year-to-date, is now trading at 21 times forward earnings. This valuation, combined with a raised revenue outlook implying 32% to 35% growth, suggests potential upside. Investors are advised to proceed with caution, as the stock may experience volatility around the earnings announcement. Nonetheless, SoFi is viewed as a long-term investment opportunity at its current valuation.