SoFi (SOFI 3.69%) has been one of the best performing stocks of 2023. Despite the overall financial sector dramatically underperforming the S&P 500 index, SoFi's stock is up by 72% for the year as of Dec. 12.
It's not difficult to understand why the banking disruptor has performed so well for investors. The results from the business continue to exceed expectations quarter after quarter. Through the first three quarters of 2023, SoFi added more than 1.7 million members, the number of financial services products used by its members increased 50% year over year in the third quarter, and the company is expecting to reach profitability for the first time in the fourth quarter.
However, SoFi could be just getting started. It is showing its capabilities as a true banking disruptor -- not only serving niches like high-yield savings or low-cost personal loans but becoming a complete replacement for a branch-based banking relationship. With this in mind, here are three bold predictions I have for SoFi as we head into 2024.
Deposits will exceed the loan portfolio
Many investors don't realize this, but SoFi hasn't been a bank for very long. It only received a banking charter in January 2022 after an acquisition. Since that time, SoFi has grown its deposit base from zero to $15.7 billion in less than seven full quarters.
However, the bank has about $21.4 billion in total loans, and the difference is financed with debt. It is highly desirable for banks to have enough deposits to cover their loans, as deposits are typically the lowest-cost source of lending capital a bank can get. But with the outstanding banking momentum, my first bold prediction is that SoFi's deposit base will reach the level of its loan portfolio by the end of 2024.
SoFi will reach 13 million members
SoFi ended the third quarter with 6.96 million members, 717,000 of which were added during the quarter. Assuming a similar growth rate in the fourth quarter, we can estimate that the company will end the year with about 7.7 million members.
CEO Anthony Noto has said that the bank will add at least 1 million members per quarter in 2024, which would translate to about 11.7 million by the end of the year. But I think SoFi's stellar marketing, user-friendly platform, and the network effect developing around its brand will result in even better growth than management's optimistic predictions. My bold prediction is that SoFi will end 2024 with at least 13 million total members on its platform.
Profits will be even greater than expected
SoFi's management has said (and reiterated several times) that it expects to achieve GAAP profitability in the fourth quarter. While management hasn't given 2024 guidance yet, the consensus analyst estimate is for full-year earnings of $0.06 per share on $2.55 billion in revenue. However, I think that if SoFi can continue to outperform expectations for growth of its business, it could handily surpass both of these as well.
Lots of execution risk ahead
To be sure, these are meant to be bold predictions. And SoFi has quite a bit of execution risk ahead of it. But the company has already established a clear pattern of exceeding even the most optimistic expectations and has done an excellent job of navigating an uncertain economic climate. Growth has been impressive so far, but I think there could be far more for SoFi than most investors expect.
