The financial sector has been hit hard in the recent stock market downturn, but banking technology company SoFi (NASDAQ: SOFI) has been beaten down more than most of its peers.
As of this writing, SoFi's stock price has fallen by 37% since it reached its peak in January, even after a recent rebound, despite reporting its first full profitable year ever as well as excellent momentum throughout its business. However, it's worth noting that the stock market has been very volatile in the few days before and after this was written, so the price change might be significantly higher or lower by the time you're reading this.
To be sure, SoFi's earnings report gave investors some concerns about profit margins, and the business can certainly be hurt by the trade war. For example, although tariff policy is still a fluid situation, if tariffs lead to inflation and the Federal Reserve leaves interest rates high, it keeps SoFi's deposit cost elevated. And if the tariffs lead to a recession, there's a good chance that consumer loan demand will fall sharply and delinquencies could rise, both of which would be negative catalysts for SoFi's business.
Having said that, this is a business with strong momentum and some interesting growth catalysts that could keep earnings growing for years to come.
SoFi has excellent momentum
The latest numbers we have from SoFi are from the fourth quarter of 2024, and it's fair to say that the company's momentum heading into this year was impressive. The company ended the year with 10.1 million members, 34% more than it had at the end of 2023, and revenue grew by 26% in 2024.
Profitability is coming along as well. 2024 was SoFi's first full year of positive net income yet, and its adjusted EBITDA grew by 26%, in-line with earnings. To be fair, SoFi's 2025 guidance was somewhat disappointing, as revenue guidance was higher than expected, but EPS guidance was lower, indicating margins might not be as strong as hoped. But SoFi has a strong history of outperforming its own expectations, so I'll be keeping an eye on this as the year goes on.
Although economic news has generally been negative, and uncertainty has increased in the stock market and overall U.S. economy, the actual news from SoFi has been quite positive.
So far in 2025, SoFi has announced two personal loan securitization agreements totaling about $1.2 billion, and it expanded its loan platform business via a $5 billion agreement with Blue Owl Capital. And the Galileo technology platform has made several key announcements, including the recent launch of its Deposit Sweep product that helps customers maximize interest earnings.
The loan platform offers tremendous potential to grow revenue in a capital-light, low-risk way for SoFi. And although it has 10.1 million members, the average customer has less than 1.5 products with the bank -- a product would be something like a checking account, a loan, or a brokerage account -- so there is plenty of room to cross-sell products to its existing customers. In fact, with most of its newer members signing up for financial services products, not loans, it creates a natural marketing funnel for the bank's personal loans, mortgages, and other lending products, especially if interest rates come down.
The bottom line
As mentioned, SoFi has lost nearly half of its market value in just over two months. But this feels like an overreaction. The stock now trades for its lowest price-to-book valuation in six months, despite excellent progress in its business during that period. Although the bank's growth momentum and margins could definitely take a bit of a hit if the trade war lasts for a while, this is still an excellent business with tremendous potential, and it looks extremely attractive at the current price.
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Matt Frankel has positions in SoFi Technologies. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
