The advent of technology is changing banking, resulting in artificial intelligence’s (AI) deployment in data collection, data integration, and analysis.
According to an IndustryArc report, the Fintech market is expected to grow at a compounded annual growth rate (CAGR) of 8.7% between 2021 to 2026, and is anticipated to be worth $161.2 billion by 2026.
Using the TipRanks [stock comparison](https://www.tipranks.com/compare-stocks/custom?ticker=SOFI&ticker=UPST) tool, let us compare two retail companies, SoFi Technologies and Upstart Holdings, and see how Wall Street analysts feel about these stocks.
**SoFi Technologies (**[**NASDAQ**](https://www.tipranks.com/index/nasdaq-100)**:** [**SOFI**](https://www.tipranks.com/stocks/sofi/forecast)**)**
SoFi (or Social Finance) was founded in 2011 and is a fintech, or financial technology company, that offers a suite of financial products through its platform, a one-stop-shop app. The company’s three major business segments include lending, a technology platform, and financial services.
SoFi’s lending services include student loan refinancing, personal and home loans, while its technology platform, Galileo, provides services, including an authorization application programming interface (API) to financial and non-financial institutions.
The company’s financial services include insurance services under SoFi Protect, a SoFi Credit Card, and Lantern Credit, a financial services marketplace.
Last month, SoFi Technologies made its debut on the Nasdaq as an independent company, following its SPAC merger with blank check company Social Capital Hedosophia.
In Q1, the company posted adjusted net revenues of $216 million, while the company had guided for revenues ranging between $190 million and $195 million. SoFi reported adjusted EBITDA of $4 million, and ended the quarter with 2,281 thousand members, a jump of 110% year-over-year.
On June 28, SoFi’s lock-up period expired. The lock-up period is the length of time after the company goes public when early employees or shareholders in the company may not sell their shares. This time period can vary between 90 to 180 days.
Following the expiry of the lock-up period, Rosenblatt Securities analyst [Sean Horgan](https://www.tipranks.com/analysts/sean-horgan) reiterated a Buy and a price target of $30 (65.9% upside) on the stock. The analyst saw “a unique buying opportunity as a result of this recent selling and ahead of a potentially significant upside catalyst (bank charter approval).”
In October last year, SoFi received preliminary conditional approval from the Office of the Comptroller of the Currency (OCC) in the United States regarding its application for a national bank charter. However, this application will still need to be reviewed by the Federal Deposit Insurance Corporation and the Federal Reserve. (See [SoFi Technologies stock chart](https://www.tipranks.com/stocks/sofi/stock-charts) on TipRanks)
Analyst Horgan expects the process for approval of the bank charter to conclude by the end of this year, adding an upside of more than 25% to the analyst’s EBITDA estimates.
The analyst said in a note to investors, “All the catalysts we expect (in order of magnitude) are: 1) SOFI’s bank charter approval/denial (expected 2021); 2) lockup period ends (June 28), employee trading restrictions expire (post-earnings, expected mid-August), senior leadership lockup expiration (Late December); 3) federal student loan forbearance period expiration (currently set for October 1, 2021); 4) rising interest rates.”
However, Horgan noted that a regulation that could allow for a four-year college course without paying any tuition fees could pose “a substantial downside to SOFI’s core student lending business, which we believe is a low-single-digit probability risk.”
The analyst believes that students enrolled in four-year undergraduate programs make up the “largest piece of SOFI’s student lending revenues and market opportunity.” In Q1, SoFi’s lending segment had student loan originations worth $1,468 million.
Horgan also believes that a rise in regulatory scrutiny when it comes to payment for order flow (PFOF) regulations should not concern SoFi shareholders as “its revenue exposure from its brokerage business is insignificant (<1% of 2020 revenues) in comparison to many retail brokers.” PFOF is the compensation a brokerage firm receives for directing orders to other parties to execute trades.
Consensus among analysts on Wall Street is a Moderate Buy based on 2 Buys. The average [SoFi Technologies price target of $27.50](https://www.tipranks.com/stocks/sofi/forecast) implies approximately 52.1% upside potential to current levels.
**Upstart Holdings (**[**NASDAQ**](https://www.tipranks.com/index/nasdaq-100)**:** [**UPST**](https://www.tipranks.com/stocks/upst/forecast)**)**
Upstart Holdings is a cloud-based artificial intelligence (AI) lending platform that connects consumers to its network of AI-enabled bank partners for loans. The company generates revenues primarily through fees paid by banks.
The company charges referral fees to banks for every loan referred through the Upstart.com website and originated by a bank partner. UPST also charges a platform fee for every loan origination, regardless of its source, and servicing fees for loans as consumers repay them.
UPST helps consumers receive personal loans by connecting them to its bank and credit union partners. It uses variables like employment and education to predict a consumer’s creditworthiness.
Last month, the company entered into a partnership with workflow application programming interface (API) connectivity provider NXTsoft to enable Upstart to streamline the implementation of its platform to financial institutions in the U.S.
In Q1, UPST reported total revenues of $121.3 million, a jump of 90% year-over-year that surpassed the Street’s estimates of $116.1 million. The company’s adjusted earnings ballooned 340% year-over-year to $0.22 per share in Q1, topping consensus estimates of $0.15 per share.
Upstart Holdings has projected total revenue to land between $150 million and $160 million in Q2. For 2021, the company increased its revenue expectations to approximately $600 million versus the prior guidance of $500 million. (See [Upstart Holdings stock chart](https://www.tipranks.com/stocks/upst/stock-charts) on TipRanks)
Following the Q1 earnings, Jeffries analyst [John Hecht](https://www.tipranks.com/analysts/john-hecht) reiterated a Buy and raised the price target from $81 to $101 (16.7% downside) on the stock. Hecht remained upbeat about the stock following strong growth trends and the company’s Prodigy acquisition.
On March 15, the company announced the acquisition of Prodigy Software, a provider of cloud-based automotive retail software, for $100 million.
In Q1, Upstart’s bank partners originated 169,750 loans worth $1.73 billion across the company’s platform, an increase of 102% year-over-year. The conversion rate was 22% on rate requests, up 14% year-over-year.
Analyst Hecht stated, “…the strong loan count and improving conversion rate highlight strong growth trends as ’21 progresses, with UPST’s AI lending platform continuing to perform well.”
The analyst noted that the company’s Q2 revenue guidance “represents ~30% upside from our prior ests. [estimates] at the midpoint.”
He continued on a positive note, saying, “We continue to believe Upstart’s cloudbased, Artificial Intelligence (AI) lending platform results in a superior credit product with attractive economics for both consumers and lenders, a ‘win-win’ model for both participants. We see LT [long term], strong growth opportunities given a first-mover advantage and a very large TAM [total addressable market].”
Consensus among analysts on Wall Street is a Strong Buy based on 3 Buys and 1 Hold. The average [Upstart Holdings price target of $143.25](https://www.tipranks.com/stocks/upst/forecast) implies approximately 18.2% upside potential to current levels.
It is important to note here that while SoFi is functioning as an online bank with a variety of financial products available through its app, Upstart offers personal and auto loans through its platform. It remains to be seen whether Upstart will expand its product offerings.
Upstart has stated in its company filing, “There is significant opportunity to expand from personal loans to auto loans, credit cards, mortgages, student loans, point-of-sale loans and home equity lines of credit (HELOC).”
While analysts are cautiously optimistic about SoFi, they are bullish on Upstart. Based on the upside potential over the next 12 months, SoFi seems to be a better Buy.