Shares of personal loan companies SoFi (SOFI) and Upstart (UPST) posted impressive gains in 2021. Today, I’m going to take a look at the major business segments of the companies and analyze what constitutes a better investment. current valuations.
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Fintech companies have been on absolute tear since the onset of COVID-19. The ongoing pandemic has accelerated the digital transformation processes of businesses and businesses globally, which has increased demand for a multitude of fintech products and services.
This macroeconomic tailwind suggests stocks such as SoFi (SOFI) and upstart (UPST) should be on your watchlist today. SoFi Technologies is valued at a market cap of $ 17.49 billion and Upstart is valued at $ 18.35 billion.
Both companies are growing rapidly, making them attractive investments for long-term growth investors to consider. But which stock is a better buy today?
The bull’s case for SoFi Technologies
SoFi Technologies offers a wide range of financial services including an online brokerage platform, credit cards, cash management and loans. Its SoFi Lantern solution lets you compare loan products and its expanding product portfolio has helped the company increase sales from $ 269.9 million in 2018 to $ 565 million in 2020.
In Q3 2021, SoFi reported revenue of $ 272 million and a loss of $ 0.05 per share. SoFi now expects total sales to exceed $ 1 billion in 2021, while Adjusted EBITDA is forecast at $ 31 million.
SoFi derives a significant portion of its sales from the lending business that drives student loans, personal loans, and even mortgages. Sales in this segment increased more than 25% year-over-year to $ 210 million. The company actually generated over $ 3.4 billion in total loan volume with personal loan origination totaling $ 1.6 billion in the third quarter.
During the quarter ended in September, Sofi acquired 377,000 new customers bringing its total number to nearly three million.
SoFi’s sales are expected to hit $ 1.47 billion in 2022, while its loss per share is expected to narrow to $ 0.28 next year from a loss of $ 1.14 per share in 2021.
The bull’s case for Upstart
Upstart provides a cloud-based artificial intelligence platform for banks and financial institutions. UPST stock is now down almost 40% from record highs, allowing you to buy the dip. Despite the recent pullback, Upstart stock has risen nearly 700% since its IPO at the end of 2020.
Upstart generates sales by providing a loan origination service to banks that pay fees to the business. Thus, Upstart has no exposure to defaults, which allows it to develop its business at a sustained pace. In fact, Upstart claims that its AI platform has reduced the number of defaults by up to 75% for the same number of loan approvals compared to traditional methods of assessing credit risk.
While Upstart primarily originates unsecured loans in the personal loan and vacation loan verticals, the company is looking to enter the automotive segment with the acquisition of Prodigy, a software company for car dealerships.
Beginner sales are plan to touch $ 1.14 billion, down from just $ 55.97 million in 2017. Its adjusted earnings per share is also expected to reach $ 2.31 in 2022, up from $ 0.23 in 2020.
I think Upstart is currently a better investment than SoFi Technologies. This is because Upstart has increasing profit margins and higher growth rates. Upstart is also entering new business lines that will allow the company to grow its turnover at a sustained rate in the future.
SOFI shares rose $ 0.19 (+ 0.9%) in pre-market Thursday. Year-to-date SOFI has gained 71.22%, compared to a 26.73% increase for the benchmark S&P 500 over the same period.
About the Author: Aditya Raghunath
Aditya Raghunath is a financial journalist who writes on business, public equity and personal finance. His work has been published on multiple digital platforms in the United States and Canada, including The Motley Fool, Finscreener, and Market Realist.
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