We recently compiled a list of 13 Best Growth Stocks Under $10 to Buy. In this article we will look at where SoFi Technologies, Inc. (NASDAQ:SOFI) ranks among the best growth stocks under $10 to buy.
After a summer dip, stocks recovered in Q3 2024, setting new records after the quarter. More than 60% of the 500 largest companies’ components outperformed the overall index that covers these stocks in the quarter. The index that tracks the 500 largest companies traded in the US is up more than 20% year-to-date, at record-high levels. Bonds also fared well, helped by declining inflation and the Federal Reserve’s aggressive half-percentage-point drop, which indicated a move away from combating inflation and toward promoting growth. Fed rate reductions boost small-cap companies, industries, and regional banks.
Value and small-cap companies overtook large tech in the major rotation that occurred during the general stock market rally. Subsequently, expensive large-cap growth names lost investor attention, while previously underperforming markets saw strong gains. The consolidation of technology is a positive development, according to King Lip, chief strategist at BakerAvenue Wealth Management. He states that ” “We’re not in a bear market for tech by any means. But you’ve definitely seen some evidence of rotation.”
Nonetheless, in Q3 2024, eight of the 500 largest companies’ eleven sectors outperformed the broader index of these 500 companies. According to Tajinder Dhillon, senior research analyst at LSEG, the Magnificent Seven companies are predicted to raise earnings by almost 20% in the third quarter of 2024, compared with a profit rise of 2.5% for the rest of the 500 largest companies. That disparity is predicted to diminish in 2025, with the remainder of the index expected to raise earnings by 14% for the full year against a 19% rise for the mega-cap group.
The Magnificent Seven “should not have to carry the profit rebound alone,” according to Lisa Shalett, chief investment officer at Morgan Stanley Wealth Management, in recent research, providing a soft landing scenario. ” “For the soft landing, we are in the ‘show me’ stage.”
Moreover, soft employment figures helped allay concerns about a recession and modest inflation. Even though the unemployment rate has increased, the overall economic trend points to strong, albeit sluggish, growth. The market is now even more optimistic due to the Fed’s aggressive rate decrease and the likelihood of future rate reductions.
It is anticipated by Morningstar analysts that the “great rotation” away from large-cap tech stocks would continue as Q4 approaches, presenting opportunities in undervalued industries. The financial services, real estate, energy, and healthcare industries are expected to grow as per Morningstar analysts, particularly with the current decline in interest rates.
According to Morningstar analysts, going ahead, the possibility of additional rate cuts and higher government expenditure in this election year should boost markets, but prudence is still advised because lower-income people are still being negatively impacted by continued inflationary pressures. Value stocks and industries with strong prospects for future recovery should be the main focus of investors.
Methodology:
We sifted through holdings of iShares Morningstar Small-Cap Growth ETF to form an initial list of 20 highest-weighted Growth Stocks Under $10 in the ETF. Then we selected the 13 stocks that were the most popular among hedge funds as of Q2, 2024. The stocks are ranked in ascending order of the number of hedge funds that have stakes in them, as of Q2 2024. We have used the stocks’ current market cap as a tie-breaker in case two or more stocks have the same number of hedge funds invested.
Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points. (see more details here)
SoFi Technologies, Inc. (NASDAQ:SOFI)
Number of Hedge Fund Holders: 29
SoFi Technologies, Inc. (NASDAQ:SOFI), a financial services startup based in San Francisco, was launched in 2011. Initially recognized for student loan refinancing, the company has since expanded its operations to include personal loans, credit cards, mortgages, investment accounts, banking services, and financial advice. The company aims to be a one-stop shop for its clients’ finances, operating only through its mobile app and website. The company also provides debit card payment and account services, as well as digital banking, after acquiring Galileo in 2020.
The firm focuses on youthful, high-income customers who may be underrepresented by traditional full-service banks. It is entirely digital, communicating with its customers primarily via its mobile app and website. Unlike previous digital banks, which typically have restricted product offerings, SoFi Technologies, Inc. (NASDAQ:SOFI) provides a comprehensive spectrum of financial services and products, ranging from student loans to estate planning. The goal is to enable clients to build their entire financial lives around SoFi. The company hopes to develop tremendous cross-selling advantages by serving as a one-stop shop for its clients’ finances, lowering its acquisition costs.
It is expected to benefit from prospective rate cuts, with CEO Anthony Noto forecasting a 75-basis-point reduction by year-end, which will boost profitability. The company posted outstanding Q2 2024 earnings, with GAAP net revenue of $598.6 million, up 20% YoY despite high interest rates.
Manyi Lu gives SoFi Technologies a Buy rating, highlighting its strategic move from student loans to a full-service financial platform aimed at tech-savvy millennials and competing with established banks. Its low costs and digital-first strategy increase its popularity, while recent revenue increases in financial services and good risk management support its long-term success. Lu’s target price includes considerable expected EBITDA growth, which supports the company’s bullish outlook.
Jim Cramer is bullish on SoFi Technologies Inc (NASDAQ:SOFI) and stated the following:
“Now the rates are coming down you are gonna see actually it’s more of a technology stock but it’s gonna go higher.”
SoFi has quickly launched an incredible number of products and services, and it is still the only firm delivering a digital full-service approach. The company has built a deposit base of over $15 billion in two years. The stock grew over 5% over the past year.
Jim Davidson, Dave Roux And Glenn Hutchins’s Silver Lake Partners is the largest stakeholder in the company from among the funds in Insider Monkey’s database. It owns 231,154,165 shares worth $205.93 million as of Q2.
Overall SOFI ranks 6th on our list of Best Growth Stocks Under $10 to Buy. While we acknowledge the potential of SOFI as an investment, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than SOFI but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published on Insider Monkey.