Down Almost 50%, Is SoFi a Buy?

Fintech disruptor SoFi Technologies (SOFI -0.40%) has pulled back considerably in recent months, despite reporting fantastic growth in key areas of its business. In this Fool Live video clip, recorded on Dec. 9, Fool.com contributors Matt Frankel, Marc Rapport, and Jason Hall discuss the fast-growing financial company and whether the stock could be a great buy right now.

Matt Frankel: This is SoFi, ticker symbol, SOFI. SoFi is a financial technology company. They went public earlier in 2021. This was one of Chamath [Palihapitiya]'s SPACs. This was IPOE. I have to keep my letters correct. But they are a big financial services company, they started out as a private student lender, and since expanded to personal loans to now they're adding all kinds of other financial products. In addition to loans, their SoFi money account is designed to be a checking account alternative.

Their SoFi Invest is supposed to be a brokerage account alternative. It's a Robinhood but emphasizing investing, not trading. Here, you can trade from your phone, things like that. But they are saying this is an investment app. They're not encouraging you to trade and speculate, things like that. Growth has been absolutely phenomenal. If you could see right here, from the beginning of 2019, they had 700,000 members, give or take. Now they're just shy of 3 million in less than three years.

Look at the year-over-year growth rates on the bottom. They're almost doubling in size year over year. Big, big growth story, and here's one of the keys: If you look at the chart on the left, that's the growth of their lending product. That's the slow and steady part of the business, that's their student lending, their personal lending, things like that. If you look at the chart on the right, this is the growth of their other financial services products like the money app, the investment app, their credit card they just launched. The business model essentially can bring customers into their ecosystem and then get them to take more and more financial products that SoFi offers.

It's a land and expand model, and right now if you do the math, they have almost 3 million members and just 3.2 million products. Their average member is only in their ecosystem with a little over one product. Maybe some people have a loan and a credit card. But for the most part of their customers have one of their products. That gives them a lot of opportunity to expand. SoFi has rebounded a little bit, but you'll see it's been a roller-coaster ride since they went public. They're still 37% off their high. If you look at how they plunged recently, yeah, they rebounded a little bit, but this is still a stock that's a lot cheaper than it was just in November.

I like this company, I'm an investor in it. I bought it before and after its SPAC IPO. I know Jason's a shareholder in this. I'm curious if, Jason, are you a customer or just an investor?

Jason Hall: I'm not I'm just an investor, but initially I was pretty reticent, if you remember, this is one that partially because I'm not a big fan of a lot of the SPACS that have come out of that shop. But the thing that convinced me with this one is how effectively they've not just added more users, more customers, but those customers are using more of the different services they offer. I mean, this is a full-service financial services company now. It's very impressive to me.

Marc Rapport: They're the real leaders, I've worked a lot in the credit union space and student lending on that side. SoFi was like the real leader in disruption of traditional banking on that side.

Hall: Yeah.

Rapport: On that side, we call it fintechs. And they also have a stadium. They bought a stadium, right? The Rams Chargers stadium naming rights. That gives them an air of legitimacy. I think it's just really impressive how much they've started from their idea, we're cool and we're hip. You remember those ads?

Frankel: Yeah.

Rapport: I thought it was a bunch of smoke.

Hall: They've done a terrific job of growing.

Rapport: Yeah.

Hall: To add to what Marc just mentioned, with the air of legitimacy. They are actually becoming a bank. They acquired an actual bank, they're getting an actual banking charter. They're going to be able to offer more and more banking products as we go on, that they otherwise wouldn't have been able to, because they will actually be a bank. That's a piece of the puzzle I think the market's really underappreciating, that they're actually going to be a bank.

Rapport: It's really important to be the primary financial institution for someone. You mentioned number of products, and even though people, a lot of these financial services products are commodities now, I think there's still a tendency to stick with one if you can and benefit from that.

Frankel: I mean, Wells Fargo is still my primary financial institution and I have five different financial products with them. Six if you count the safe deposit box I have in a branch, which SoFi is never going to offer that. But five different financial products that SoFi could potentially disrupt.

Rapport: Keep an eye on those branches, by the way, they shut them down.

Frankel: I know, I had to move the safe deposit box once already because the branch closed. But I don't know, Jason, any parting thoughts on SoFi?

Hall: As long as they continue to execute the way they have. I'm going to continue to own it. I know a lot of people aren't, a lot of investors aren't as crazy about it as I am. But I've become very convinced that this is the one that 10 years from now, I'll be very glad that I invested in.

Frankel: Yeah, it's a long-tailed play. It's going to be a little bit of a roller-coaster ride.