The market downturn has been hard to bear as most of us have seen our portfolios shrink. But one positive aspect of the correction was that it lowered the valuations and prices of some very good companies and made their stocks more affordable.
In fact, you can now find great companies trading below $20 per share. Here are two you might consider.
1. SoFi Technologies, $8.55 per share
Sofi Technologies ( SOFI 4.51% ) is an online financial services company with an app that offers loans, mortgages, banking, investments, personal finance tools, and direct deposits, among other services. The company has seen its stock price fall precipitously this year, down 41% year-to-date and around 61% since early November. It is currently trading at less than $9 per share and has been hit hard by the correction in overvalued growth stocks.
The fintech went public in early 2021 and is still not profitable. But there’s a lot to like about SoFi’s potential. It experienced rapid growth, setting records for new members/users added and products used in the fourth quarter, as well as a 67% year-over-year increase in revenue.
Two things really set it apart from most competitors. On the one hand, it is a fintech that has a banking charter, which it received in February. It can now hold deposits, initiate loans internally and does not have to share its income with banking partners. It can also set its own interest rates. With interest rates expected to rise, SoFi should start to see its interest income increase over time.
The other thing that sets SoFi apart is its banking-as-a-service business, which it acquired when it bought Galileo in 2020 and bolstered this month with the acquisition of Technisys. Through this activity, he helps other companies to develop their own digital banking business.
The combination of Technisys’ platform with Galileo will support multiple products including checking, savings, deposits, loans and credit cards through application programming interfaces. This will help SoFi meet the growing needs of its current partners and reach new ones. SoFi has the noble goal of becoming the Amazon Fintech Web Services with its one-stop financial services platform.
2. LendingClub, $14.24 per share
loan club ( CL 8.78% ) is quite similar to SoFi in that it is also a digital lender that uses artificial intelligence and machine learning models to make lending decisions. It also has a banking charter, which it acquired during the 2020 purchase of Radius Bank. These are two of the few fintechs that have a banking charter.
But LendingClub is different from SoFi in that it offers a peer-to-peer digital lending marketplace for individuals and businesses to obtain loans from each other. It generates fees from members who use the marketplace.
Much like SoFi, it has seen phenomenal growth and has seen its stock price soar by around 275%, from around $12 in early 2021 to around $45 in early November. Although LendingClub was caught in the sell-off that began last fall, it wasn’t as overvalued as many other growth stocks. In fact, it’s pretty cheap right now with a price-to-sales (P/S) ratio of around 2 and a forward price-to-earnings ratio of 12.
LendingClub is trading at around $14.24 per share, down 41% year-to-date. But analysts are bullish on the stock, with a median price target of $30 per share over the next 12 months, which would represent a 100% gain from its current level.
As its share price tumbled, LendingClub posted another strong performance in the fourth quarter with record revenue of $262 million, up 247% year-over-year. It generated $179 million in non-interest revenue from its market and $83 million in interest revenue from its loans, up 27% from last quarter. Most of its loans are installment loans for credit card debt, home loans, personal loans, auto refinance, student loans, and other purposes. The company posted a profit for the third straight quarter with net income of $29 million.
As it ramps up its lending operations with its new banking charter, LendingClub should see continued growth in net interest income, especially with rising interest rates and cross-promotion opportunities within its large market. peer to peer. The company forecasts revenue of $1.1-1.2 billion in 2022, up from $816 million in 2021, and net income of $130-150 million for 2022.
These two very similar fintechs have great upside potential and their price is currently extremely low.
This article represents the opinion of the author, who may disagree with the “official” recommendation position of a high-end advice service Motley Fool. We are heterogeneous! Challenging an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and wealthier.