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SoFi Technologies (WKN: A2QPMG) and Upstart Holdings (WKN: A2QJL7) are part of the unstoppable fintech industry, and both stocks have the potential to increase in value tenfold over the next ten years. Here is what you should know.
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1. SoFi Technologies
SoFi is a fintech company that relies on mobile devices. Its platform includes credit products such as student loans and mortgages, as well as financial services such as money management accounts (SoFi Money), brokerage accounts (SoFi Invest), credit cards (SoFi Credit Card) and access to third-party insurance products (SoFi Protect).
In 2020, SoFi also acquired Galileo, a technology platform that allows companies to offer digital banking services. Galileo makes it possible, for example, to issue physical or digital debit cards, set up deposit accounts and process payments. Several well-known fintechs are betting on Galileo, including Chime, MoneyLion and Robinhood Markets (WKN: A3CVQC).
The scale and simplicity of the SoFi platform gives it an advantage over many other competitors, which has helped the company grow rapidly. In this context, the number of SoFi members has grown for eight consecutive quarters, and the number of products used by these members has grown even faster. In total, this huge commitment has led to a turnover of 231 million US dollars, a 101% increase.
Looking ahead, SoFi estimates its market opportunity at $2 trillion, which means the company has plenty of room to grow its business. To this end, in March 2021, the company filed its application to become a bank holding company and reached an agreement to acquire Golden Pacific Bank. Once SoFi has a national banking license, the resulting synergies should boost the business.
Currently, the company relies on banking partners to provide money management services to SoFi Money account holders. However, with a banking license, SoFi could offer these services directly. This in turn would allow the company to fund loans with customer deposits, which would mean lower interest rates for borrowers and higher interest rates for SoFi Money account holders. This would not only add value for members, but also improve SoFi's profitability. Therefore, this stock (with a market capitalization of 18 billion. U.S. dollars) to grow tenfold over the next ten years and become a company valued at 180 billion. Become a US Dollar.
2. Upstart Holdings
Upstart is a fintech company that is transforming the consumer credit industry. Until now, banks have used credit models that take into account (at most) 30 variables to determine who is eligible for financing and at what interest rate. However, Upstart believes that these models deprive many creditworthy people of a loan and that many people who receive a commitment have to pay too much. Case in point: 80% of Americans have never defaulted on a loan, but only 48% have access to prime credit.
So Upstart is relying on artificial intelligence to make consumer financing more comprehensive and efficient. The platform collects over 1.600 data per applicant and compares these variables with 10.5 million repayment transactions. This allows Upstart to quantify risk more accurately than alternative methods. In this context, the company believes that its AI models are four to eight times more effective than traditional credit models.
Who benefits? Allen. Consumers benefit from higher approval rates and lower interest rates, while Upstart's banking partners benefit from higher approval rates (more business) and lower loss rates. And the network effect created by Upstart's AI models is likely to amplify these benefits over time. In other words, the more loans are granted via the platform, the more data Upstart collects and the more intelligent its forecasting models become.
Not surprisingly, Upstart is growing at a rapid pace. In the second quarter, bank partners used Upstart technology to originate loans worth. US dollars awarded, 1.605% more than last year's. As a result, its revenue increased by 1.018 % to 194 million. US dollars, and the company generated a GAAP (Generally Accepted Accounting Principles) profit of 37 million euros. US dollars.
There are many reasons for shareholders to be excited about this company. Upstart recently entered the auto loan space, bringing its market opportunity to 719 billion. Increase U.S. dollars, but the company plans to expand into other markets in the future, including credit cards, student loans and mortgages. This would increase its total addressable market (TAM) to 4.2 trillion US dollars. For comparison's sake, Upstart's first half of 2021 saw just 4.5 billion. US dollars in loans brokered (or. 9 billion. US dollars on an annualized basis), which is equivalent to 1.2% of its current TAM and 0.2% of its potential TAM.
Therefore, I believe this $26 billion fintech stock can grow tenfold over the next decade.
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This article reflects the opinion of the author, which may differ from the "official" recommendation position of a premium advisory service of The Motley Fool. Questioning an investment thesis – even one of our own – helps us all think critically about investments and make decisions that help us become smarter, happier and richer.
This article was written in English by Trevor Jennewine and published on 10.11.2021 on Fool.com published. It has been translated so our German readers can join the discussion. does not own any of the shares mentioned. The Motley Fool owns and recommends shares of SoFi Technologies, Inc. and Upstart Holdings, Inc.