SoFi (SOFI) stock recently experienced a notable downturn after a period of strong gains. The stock had benefited significantly from consecutive interest rate cuts in 2024, which created a favorable environment for its lending platform to thrive. Despite this boost, concerns over the company's valuation and broader economic uncertainties triggered a substantial sell-off, resulting in a sharp 24.1% decline over just one month. Furthermore, the stock has retreated roughly 36% from its 52-week high.
This downturn has somewhat alleviated previous valuation worries, prompting questions about whether SoFi is now a bargain buy. The answer hinges on the company’s future growth trajectory.
Against this backdrop, let’s delve into the company’s potential for growth and assess whether it presents a compelling value investment at its current price levels.
SoFi Poised to Deliver Solid Growth
With a steadily expanding member base and a broadening suite of financial products, SoFi will deliver solid growth in the coming years. Notably, this fintech reported over 10 million members by the end of Q4, reflecting a 34% year-over-year increase. This membership growth is complemented by an expanding product portfolio, with 1.1 million new products added in Q4 alone, driving a 32% increase to more than 14.7 million products. These numbers highlight SoFi’s ability to attract customers through a diversified offering.
A key factor supporting SoFi’s future growth is its strategic shift toward capital-light, fee-based revenue streams. By diversifying beyond traditional lending, SoFi is reducing its exposure to credit risk while transitioning toward a more stable, high-margin business model. In Q4, the company’s Financial Services and Technology Platforms segments accounted for a record 49% of its adjusted net revenue, up from 40% the previous year. These segments saw a remarkable 52% year-over-year revenue growth, signaling strong momentum in SoFi’s transformation into a more resilient fintech company.
Another competitive advantage is SoFi’s growing deposit base, which has surged to $26 billion since it secured a bank license in 2022. A significant portion of these deposits come from direct deposit customers, providing SoFi with a low-cost funding source. This enables the company to offer competitive loan rates while maintaining healthy profit margins.
Looking ahead to 2025, SoFi is on track for another year of robust growth. The company is expected to add at least 2.8 million new members, reflecting a 28% year-over-year increase. Additionally, its projected adjusted net revenue is estimated to reach between $3.20 billion and $3.275 billion, representing an annual growth rate of approximately 23% to 26%. SoFi’s adjusted EBITDA is forecast to land between $845 million and $865 million, reinforcing its trajectory toward higher profitability and operational efficiency.
Beyond 2025, SoFi remains confident in its ability to sustain strong growth. The company anticipates exceeding its medium-term goal of increasing its revenue at a compound annual growth rate (CAGR) of 20% to 25% through 2026. Moreover, it projects 2026 EPS to range between $0.55 and $0.80 per share, with expectations of sustaining 20% to 25% annual EPS growth beyond 2026.
Is SoFi Stock a Bargain?
Valuation remains a critical factor for considering SoFi at its current levels. SoFi stock trades at a forward price-earnings (P/E) ratio of 43.1x and a price-book (P/B) ratio of 1.88x. While this may seem expensive compared to traditional banks, SoFi’s high growth rate makes it attractive. Further, when stacked against other fintech peers, such as Affirm (AFRM) and Upstart (UPST), SoFi looks compelling. AFRM and UPST trade at much higher P/B ratios of 5.26x and 6.83x, respectively, making SoFi a relative bargain in the fintech sector.
Wall Street analysts maintain a “Hold” consensus rating on SoFi stock. However, the average price target of $14.20 suggests a potential upside of 20% from current levels.
Final Thoughts
While SoFi’s stock has seen a pullback, its long-term growth story remains intact. With a rapidly expanding user base, a shift toward more sustainable revenue streams, and benefits from low-cost funding sources, SoFi could be well-positioned to deliver substantial returns in the coming years. This dip might be an opportunity for investors looking for a high-growth stock.
