While the broader markets are trading close to record highs, several growth stocks have lost momentum in recent months. This is because investors have largely moved away from expensive valuations and purchased companies trading at a cheap multiple. But the ongoing sell-off allows you to buy quality stocks at a lower price.
Here, we look at two such fintech stocks in SoFi Technologies (NASDAQ: SOFI) and Upstart (NASDAQ: UPST) that should be on your buying radar right now.
Valued at a market cap of $10.46 billion, shares of SoFi Technologies are down almost 50% from record highs. In the last 12-months, the company has generated $870.8 million in sales, an increase of 92% year over year. The company confirmed it’s on track to end the year with $1 billion in sales while the top-line might expand to $1.44 billion in 2022, according to Wall Street estimates.
SoFi began operations as a lending platform where you could apply for personal as well as student loans. However, over the years, the company has expanded its suite of solutions to offer services that include insurance and investments in addition to debit and credit cards.
SoFi increased its customer count by 96% year over year in Q3, while the number of customers using more than one product rose by 108%. While still unprofitable, SoFi is forecast to narrow its loss per share from $1.2 in 2021 to $0.31 in 2022.
SOFI stock is valued at a forward price to 2022 sales multiple of 7.3x which might seem expensive. But its stellar growth forecasts allow the company to command a premium valuation.
Analysts also expect SOFI stock to touch $23.88 within the next 12-months which is 82% higher compared to its current trading price.
Upstart went public in December 2020 and its share price rose from $44 in that month to an all-time high of $401 last October. Right now, UPST stock is trading at $109.25, valuing the company at a market cap of $8.95 billion.
Upstart aims to leverage artificial intelligence tools to disrupt the legacy loan-disbursement process. In fact, Upstart claims its AI platform may increase loan approvals by 173% while maintaining a similar loss rate compared to traditional banks.
It ended Q3 with 31 banking partners, allowing it to generate $3.1 billion in total loan volume, an increase of 244% year over year.
Upstart’s sales stood at just $96 million in 2018 and this figure is forecast to touch $1.2 billion in 2022. Comparatively, its adjusted earnings per share are forecast to rise from $0.23 in 2020 to $2.35 in 2022.
UPST stock is valued at a forward price to sales multiple of 7.5x and a price to earnings multiple of 46.4x. Its also trading at a discount of 140% to average analyst estimates.
Upstart is one of the top growth stocks to buy right now given the addressable market for personal loans stands at $81 billion. Further, the company recently entered the auto loan market which is worth $672 billion. It is also poised to target other categories that include corporate and mortgage loans.
Contributing Writer at MyWallSt
Aditya took an interest in the stock market during the financial crash of 2008-09. His favorite stocks include Roku and Apple as both companies enjoy a leadership position in their respective verticals and are poised to beat the broader markets consistently going forward.