Customers are the lifeblood of any business. A satisfied customer base leads to a virtuous cycle of attracting more customers, leading to higher revenues and profits for a company. This leads to continued innovation of products as companies strive to retain and increase their number of customers.
The 10 million customers mark for any company is a significant milestone reflecting customer loyalty and sustained demand for a company's products or services. That is exactly what SoFi Technologies (SOFI) has achieved recently.
About SoFi Technologies Stock
Founded in 2011 and based out of San Francisco, California, SoFi Technologies is a prominent online personal finance company offering a suite of products and services. SoFi operates on a direct-to-consumer model, leveraging advanced technology to offer a seamless and integrated financial experience. Its diverse services include student loan refinancing, personal and mortgage loans, investment options, and insurance products, all accessible through its platform.
Valued at a market cap of $16.9 billion, SoFi stock has rallied 61% on a year-to-date basis, outperforming both the S&P 500 Index ($SPX) and the Nasdaq Index ($NASX).
Now, apart from its commendable customer milestone, what else is working in favor of SoFi? And what are the possible headwinds that can act as impediments to the stock's upward trajectory? Let's have a closer look.
Steady Financials
SoFi's burgeoning customer base is accompanied by a growth in revenue and earnings. Revenue for the latest quarter surpassed estimates to come in at $697.1 million, up 30% from the previous year. A significant yearly leap of 102% witnessed in the net revenue from the financial services segment to $238.3 million resulted in the overall growth in revenues for the company.
Meanwhile, after experiencing losses in many prior quarters, the company has achieved profitability for four consecutive quarters, including the most recent one. With an EPS of $0.05 per share, the company's profits not only came in above the consensus estimate, but compared favorably to the previous year's loss of $0.29 per share.
Further, SoFi upped its product count to 13.7 million from 10.4 million in the previous year. Impressively, 32% of new products were accessed by members who already signed up for SoFi, showing just how successful SoFi's multichannel approach was.
Additionally, SoFi's loan origination amount for the quarter stood at $6.3 billion which denoted a growth of 23% from the prior year with personal loans, its core offering increasing by 26% in the same period to $4.9 billion.
However, the company's cash balance and cash equivalents of $2.35 billion remains below its total debt of $3.18 billion.
Looking forward, the company is constantly improving its 2024 guidance for adjusted net revenue and profitability metrics based on its business stability and growth potential. For 2024, SoFi projects adjusted net revenue between $2.54 billion and $2.55 billion, which is up from $2.07 billion in 2023, prior 2024 guidance of $2.45 billion, and original guidance of $2.39 billion.
Other Drivers
Other than its lending platform, SoFi is leveraging strength from its technology platform, which reported nearly $103 million in net revenue, reflecting a 14% year-over-year increase. The Tech Platform division, driven by Galileo and Technisys, remains a cornerstone of SoFi’s long-term growth strategy. With approximately 160 million accounts (up 17% YOY), the platform is gaining traction among banks, fintech firms, and consumer brands looking to modernize their infrastructure. Recent successes in Latin America and the U.S., alongside innovative offerings like the Galileo Instant Verification Engine (GIVE), underscore the platform’s ability to drive growth and innovation in its addressable market.
In addition to organic growth, management is actively pursuing new catalysts to diversify revenue streams. A $2 billion agreement with Fortress Investment Group is designed to shift SoFi’s revenue base toward more fee-based, less capital-intensive sources. SoFi’s integration with Nova Credit’s Cash Atlas solution is another strategic move aimed at enhancing its growth potential. This partnership enables SoFi to access consumer-permissioned bank data and cash flow analytics, improving risk assessment capabilities for better credit decisions. It also broadens SoFi’s market reach, as traditional credit assessment methods often exclude certain customer segments, allowing the company to serve a wider range of borrowers.
Internally, SoFi continues to innovate with new product launches. In October, it introduced two new credit cards: the SoFi Everyday Cash Rewards Credit Card, designed for users seeking rewards through daily spending cashbacks, and the SoFi Essential Credit Card, tailored for individuals looking to build or improve their credit scores. These offerings align with SoFi's mission to cater to diverse customer needs while expanding its product portfolio.
Looking ahead, the anticipated lower-interest-rate environment next year provides an additional tailwind for SoFi. Reduced rates are likely to stimulate borrowing, benefiting its lending business, while also easing financial pressure on existing borrowers, potentially lowering default rates and further strengthening SoFi’s overall financial performance.
What Do Analysts Think About SoFi Stock
Analysts have attributed a rating of “Hold” for the stock with a mean target price that has already been surpassed. The high target price of $19 indicates upside potential of about 20% from current levels. Out of 17 analysts covering the stock, 3 have a “Strong Buy” rating, 1 has a “Moderate Buy” rating, 9 have a “Hold” rating, 2 have a “Moderate Sell” rating and 2 have a “Strong Sell” rating.
