Here's Why SoFi Stock Is a Buy Before Jan. 27

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SoFi Technologies (NASDAQ: SOFI) stock ended 2024 on a high note, rising nearly 55% for the year. That was a huge success for a stock that more than doubled in value (up 116%) in 2023 but then traded in a negative range for the first nine months of 2024. The fintech company gradually proved itself over the course of the year, showing that it was getting more profitable, adding millions of new members, and growing its non-lending services. The icing on the cake was that its lending business, which was what was worrying the market, ended the year in better shape than management expected.

Things appear to be going well for SoFi. If you're considering opening a position, you might want to consider doing so before Jan. 27.

A powerhouse fintech stock

SoFi is the quintessential fintech, or financial technology, stock. Its easy-to-use mobile app connects customers to a full array of financial services, from bank accounts and lending products to credit cards and investment tools. It's a one-stop shop that allows customers to manage all aspects of their financial lives seamlessly and simply.

SoFi's core (and original) segment is lending, especially to students. But management has followed what it describes as a financial services productivity loop strategy -- attracting new customers with one product, then upselling and cross-selling them to more and higher-priced products. It has two non-lending segments, comprising the financial services segment and the tech platform, which is a financial infrastructure business under the banner Galileo that it acquired in 2020. Management has said its goal for the tech platform is to turn it into the Amazon Web Services of financial services.

The strategy is working. Users engage with SoFi's platform at a high rate, and the non-lending segments continue to grow faster than the lending segment, leading to them accounting for increasingly large shares of the total business. The revenue from these non-lending segments increased by 64% year over year in Q3 and rose from 39% of the total to 49%. Total revenue was up 30% year over year, and SoFi added 756,000 new members. Revenue per product increased from $53 last year to $81 this year.

The non-lending segments are also pulling more of their weight on the bottom line. When SoFi posted its first quarterly net profit in the 2023 third quarter, it mostly came from the lending segment. A year later, all of the segments showed year-over-year growth, and financial services profits are skyrocketing.

Metric

Q3 2023

Q3 2024

Lending segment contribution profit

$204 million

$239 million

Financial Services segment contribution profit

$3.3 million

$100 million

Technology Platform segment contribution profit

$32 million

$33 million

Data source: SoFi quarterly reports.