Increased investments in artificial intelligence (AI) technology, easing inflation, and three consecutive rate cuts from the Federal Reserve have driven the stock market higher in 2024. Thanks to this, the S&P 500 Index ($SPX) has risen over 24% in the year-to-date.
While several stocks have rallied significantly and look expensive on the valuation front, the momentum driving these gains could persist into 2025. Moreover, some of these stocks are trading under $20, implying investors can snap up shares without breaking the bank. One such under-$20 stock looks particularly compelling. Let’s take a closer look.
About SoFi Technologies Stock
SoFi Technologies (SOFI) has been on a remarkable run, with its stock more than doubling in value over the past three months. This impressive rally follows the Federal Reserve's recent interest rate cuts and SoFi’s strong financial performance in 2024.
The current low-interest-rate environment is proving to be a significant advantage for SoFi as it heads into 2025. Reduced borrowing costs are expected to boost consumer demand for loans, giving the company an ideal opportunity to expand its loan portfolio. This growth in lending activity is likely to translate into increased revenue and improved profit margins, further solidifying the company’s position.
SoFi Posts Strong Q3 Results
SoFi’s strategic focus on diversifying its revenue base will continue to add stability and accelerate its growth. The company is transitioning toward capital-light, low-risk, fee-based income streams offering greater stability and predictable earnings. This approach reduces the risks typically associated with lending while establishing a more resilient business model. In the third quarter, fee-based revenue accounted for $174 million, roughly a quarter of SoFi’s adjusted net revenue. Even more impressive is the 65% year-over-year growth in this segment.
Key drivers of this fee-based revenue growth include a record-breaking quarter in SoFi’s loan platform business, which generated nearly $56 million in revenue, an increase of over fivefold compared to the previous year. Additionally, interchange more than revenue doubled year-over-year, further showcasing the strength of SoFi’s diversified business model.
While fee-based revenue is growing remarkably, SoFi’s lending segment also continues to expand. Favorable interest rate trends, improving credit conditions, and robust performance across its lending products led to a record $6.3 billion loan volume and $392 million adjusted net revenue for Q3. These strong numbers set the stage for continued growth into 2025, bolstering the company’s overall financial outlook.
Adding to its strengths, SoFi’s customer base is expanding rapidly, bringing its total membership to 9.4 million. The company is also improving monetization across its products, with annualized revenue per product climbing to $81, up 52% from $53 a year ago. This combination of growing membership and enhanced monetization drives revenue and creates significant cross-selling opportunities across SoFi’s diverse offerings.
SoFi is further solidifying its position in the financial technology space with its high-quality deposit base. The company’s member deposits grew by nearly $2.4 billion to almost $23 billion, while overall deposits increased to $24.4 billion. Moreover, almost 90% of these deposits come from direct deposit customers, providing the company with a low-cost funding source. This strategic advantage enables SoFi to offer loans at competitive rates, enhancing its profitability and appeal to borrowers.
SoFi anticipates keeping its net interest margin comfortably above 5% in the coming years. This outlook is supported by the company's growing reliance on low-cost deposit funding and its effective management of the balance between deposit and lending rates.
However, as SoFi’s stock has experienced a notable rally, Wall Street analysts are exercising caution. The stock currently has a “Hold” rating.
The Bottom Line
However, SoFi is heading into 2025 with favorable conditions, including declining rates, a stable economy, diverse revenue sources, an improved monetization rate, and an expanding customer base. These factors make SoFi well-positioned to deliver continued growth, providing a strong foundation for its financial performance and stock price in the years ahead.
