Explore the High-Performing Equity Showcasing Exponential Expansion Capable of Turning Millionaires
In the past, SoFi's stock performance didn't reflect its impressive growth momentum and potential, but that's starting to change. With its excellent growth trajectory and future prospects, SoFi could easily double in size, or even more, in the next few years. While it's not the lowest-risk bank stock, it makes a compelling case from a risk-reward perspective.
SoFi started out as a student loan refinancing company, but it's transformed into a full-fledged online bank offering checking and savings accounts, brokerage accounts, personal loans, mortgages, credit cards, and more. In the most recent quarter, SoFi added 756,000 new members, more than ever before, and is seeing strong momentum in its financial services products. Revenue increased by 30% year over year, and SoFi is now a profitable bank, even on a non-adjusted basis.
SoFi's banking business is particularly impressive, considering it started from scratch at the beginning of 2022 when it obtained a banking charter. SoFi now has more than $24 billion in deposits, almost enough to cover its entire loan portfolio. The growing deposit base also makes SoFi a major candidate to benefit from the Federal Reserve's rate cutting, as it currently has a 4.19% cost of deposits that could decline sharply in the next couple of years.
SoFi has a lot of potential for growth. Its mortgage lending business could be a major driver as rates fall, and there are several types of lending and banking products that SoFi could choose to offer. One specific growth catalyst is SoFi's third-party personal loan origination business. SoFi recently signed an agreement to originate as much as $2 billion in loans for investors, and it has been actively referring applicants to partner lenders instead of using its own money. This could create a rapidly growing stream of capital-light income.
SoFi's credit card business is another key area to watch. SoFi recently rolled out two new credit card products, and this could be just the beginning. For example, SoFi targets an affluent clientele in its personal loan and investment business, so a high-end credit card product could be a good fit.
The market is finally showing SoFi some love. SoFi's stock price has more than doubled over the past year, and while it has a higher valuation than other bank stocks, it could be worth every penny given its sustainable 30%-plus growth rate and massive future opportunity. While SoFi may not join the ranks of the big banks anytime soon, it could certainly multiply to several times its size within the next few years.
Enrichment Data:
- SoFi reported a significant 14.8% year-over-year increase in Q4 revenue to $681.91 million, reflecting confidence in the company's growth trajectory.
- Analysts from William Blair lean towards an Outperform rating, spotlighting the growing trend towards alternative banking solutions among younger demographics.
- SoFi's efforts to expand its technology platform services through Galileo and Apex may have contributed to the increased price targets, reflecting improvements in financial performance and successful expansion of product offerings.
- Despite operational inefficiencies and negative EBITDA margins, SoFi continues to show resilience, with a robust balance sheet and significant long-term growth prospects.
SoFi's impressive growth in revenue and membership, coupled with its profitable banking status, has opened up opportunities for finance-related investments. With a focus on mortgage lending, third-party personal loan origination, and high-end credit card products, SoFi has the potential to generate substantial capital-light income and multiples its size.
Given SoFi's significant revenue increase, positive market sentiment, and expanding product offerings, it's no wonder that analysts are optimistic about its future, encouraging investment in its stocks.
