Down 33% in 2024, is this growth stock back in bargain range?

Companies in the growth stock category often see periods of boom and bust, but is the tide changing for this former market favourite?

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A darling of the fintech world, once soaring on the wings of innovation, now finds itself in a nosedive. SoFi Technologies (NASDAQ: SOFI), the plucky upstart that dared to challenge the banking status quo, has seen its stock plummet 24.5% over the past year, with a gut-wrenching 33% drop in 2024 alone.

But whether there may be signs of a recovery, or if the pain may continue, is still up for debate.

What happened?

SoFi burst onto the market in 2021, promising to revolutionise everything from student loans to investing. Led by the charismatic Anthony Noto, a former Twitter exec and sports finance guru, the company painted a picture of a financial utopia where millennials could refinance their student debt and trade while sipping avocado lattes.

For a while, it seemed like the sky was the limit. However, growth isn’t always a one-way street. After bursting through $25, the share price came crashing back to earth with a bang when guidance forecasts disappointed.

The future

Now, with the shares hovering around the $6 mark, the burning question on every investor’s mind is whether this a golden opportunity to snag a future fintech giant at a discount or are we catching a falling knife?

First, the good news: revenue is growing extremely quickly, hitting a whopping $2.24bn in the past year. Analysts are also forecasting earnings growth of 52.32% per year.

However, the firm is still losing money at a concerning rate, with a net loss of $218.8m.

And here’s where it gets really interesting: the firm has less than a year of cash left. In the high-stakes world of growth stocks, something has got to give, which could easily send investors to the exits.

Disruption

To many however, SoFi isn’t just a company; it’s a movement. With a suite of products that reads like a millennial’s financial wish list – from zero-fee trading to crypto wallets – the firm is positioning itself as the one-stop shop for the digital native’s fiscal needs. And in a world where traditional banks are about as popular as a trip to the dentist, that’s a powerful proposition.

The verdict

So, is this a hidden gem waiting to be discovered, or a cautionary tale in the making? The truth, as always, lies somewhere in the middle. For the bold investor with nerves of steel and a taste for disruption, these prices could be like buying Amazon in the early 2000s. The potential upside is enormous, but so is the risk.

On the flip side, the more conservative among us might see this as a classic case of a company that flew too close to the sun. The lack of profitability and dwindling cash reserves are red flags that can’t be ignored. One thing’s for sure – whether the shares soar back to $25 or become a cautionary tale in growth stock history books, it’s going to be interesting. The future of finance is being written before our eyes, and SoFi could be holding the pen – even if it’s running a bit low on ink. I’ll be staying clear for now, but definitely want to keep this one on my watchlist.

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Gordon Best has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

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