SoFi Technologies (SOFI +2.19%) stock gained 116% in 2023 according to data provided by S&P Global Market Intelligence. It demonstrated high growth, improving profitability, and overall resilience in the face of a pressured economy.
SoFi is the face of a new kind of banking
SoFi operates an all-digital app that offers a suite of financial services that are user-friendly and geared toward a young demographic. It began as a student loan cooperative, and it has expanded from its humble beginnings to become a serious player in banking.
The acquisition of a banking charter in 2022 and the entry into other financial products was more than fortuitous, since the student loan moratorium first came into being in 2020. But it has been a successful strategy, shielding SoFi from the worst of the loan repayment pause and opening it up to increasing engagement in light of rising interest rates.
NASDAQ: SOFI
Key Data Points
Lending was strong in the 2023 third quarter, with a 48% year-over-year increase in loan originations and a 90% increase in net interest income. But 67% of revenue growth came from the non-lending segments of its technology platform and financial services. Total revenue increased 27%, and all three segments were profitable in the third quarter. Total company adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) increased 121% over last year to a record $98 million, and net loss per share without a one-time impairment charge was $0.03. Management said it would report positive net income in the fourth quarter.
The company is deploying a strategy it calls the financial services productivity loop, and it involves bringing members into the SoFi ecosystem and increasing engagement across products. SoFi added 717,000 new members in the 2023 third quarter, and new product adds totaled more than 1 million.
Can it continue this year?
SoFi is demonstrating that it can compete with the big banks, and it's just getting started. Revenue growth has slowed down in this high interest rate environment, but if the Federal Reserve starts cutting rates this year, as it has pledged to do, it should be a positive for all banks. SoFi might be poised to benefit more than others, though, due to its digital focus and technological edge.
It has a long growth runway, and SoFi stock looks reasonably priced, trading at a price-to-sales ratio of 4. It's a top growth stock to buy now if you have some risk tolerance.
