Markets have been unsettled at the start of 2025, with considerable uncertainty regarding President Donald Trump's economic policies and how things will unfold. The benchmark S&P 500 has experienced significant volatility in recent weeks.
SoFi Technologies(NASDAQ: SOFI) hasn't been immune from this dramatic volatility. The company posted a strong year of growth and turned in its first full-year positive net income, but SoFi stock has fallen 31% since the turn of the new year. The fintech's valuation is significantly cheaper than a few months ago. Here's what investors need to know about buying SoFi today.
SoFi is coming off an excellent year
SoFi's goal is to become a one-stop financial stop for its customers. One way it looks to bring more customers to its platform is with its SoFi Plus membership. With this subscription plan, which is $10 per month, members unlock higher interest rates on savings accounts, get better cash-back rewards on SoFi credit cards, and get one-on-one financial planning with SoFi's wealth advisors.
Last year was an excellent one for the fintech, which earned $1.7 billion in net interest income, a staggering 36% growth from last year and 193% growth from two years ago. This excellent growth is a big reason SoFi posted a record net income of $499 million after seeing losses exceed $300 million each of the past two years.
One component of SoFi's stellar growth is its deposit growth. A few years ago, the company acquired Golden Pacific Bancorp, giving it a banking charter that enabled it to take in deposits and hold more loans on its balance sheet. The company has taken an aggressive approach to adding deposits by offering high-yielding accounts to get more deposits on its platform, and that move has paid off handsomely.
Uncertainty lingers over SoFi and other consumer lenders
Investors may have reason to be more cautious about SoFi's growth in 2025. The company attracted massive deposits over the past few years thanks to its appealing high-yield savings accounts. However, interest rates on these accounts have fallen to some degree, and the future path of interest rates remains in the air. If interest rates stay around this level or go down, SoFi's advantage -- high interest rates on savings accounts -- may not drive growth quite the same way it did in recent years.
Investors are also keeping a watchful eye on SoFi's expenses. Last year, the company managed costs and bolstered its balance sheet. During its most recent earnings call, CFO Chris Lapointe indicated a change, saying: "We want to better tilt our incremental revenue growth toward investment. We have significant untapped addressable markets in front of us, and we have proven that the more we invest, the more we produce durable growth and strong returns."
Then, there are concerns about the economic backdrop and how it will impact the operating environment for lenders like SoFi. There remains much uncertainty around tariffs and ongoing trade wars, with many experts concerned that inflationary pressures could reemerge. In that case, interest rates may not decline meaningfully from here, which could weigh on its consumer lending business.
Image source: Getty Images.
Its technology business provides diversification
One aspect of SoFi's business that can provide resilience is its technology platform. With its banking charter, the company can provide critical infrastructure for non-banking entities, allowing them to offer financial products built on top of SoFi's platform.
The company has made significant investments in platforms like Galileo and Technisys, which provide back-end services and support multiple products simultaneously. These platforms run on the cloud, allowing banks to process and analyze data in real time. The technology segment is attractive because it provides a steady source of fee-based revenue and an alternative revenue stream that differentiates the company from other banks and lenders.
Is SoFi a buy today?
SoFi has done a solid job growing its deposit base and earnings. However, concerns about the broader economic backdrop and its expansion efforts could weigh on the business. That said, I like its prospects. Its consumer business has a nice upside, and it recently expanded its loan platform business, showing good demand for its loans.
The stock's recent 30% sell-off has it trading at a price-to-earnings (P/E) ratio of around 28.8, well below its P/E ratio of 48.8 just a few short months ago. While the stock remains vulnerable to price swings, I still like its long-term prospects and think it's a solid stock for long-term investors to buy the dip on amid the recent market sell-off.
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Courtney Carlsen has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
