Compared to megabanks like Wells Fargo or Bank of America, SoFi Technologies (SOFI +2.51%) is anything but an industry titan. In fact, with only 10 million customers and just a little more than $30 billion in assets, SoFi doesn't even make a dent in the reach of its larger rivals.
As veteran investors understand, however, size isn't everything. It's a company's growth trajectory that ultimately determines its stock's investment potential, and SoFi has plenty of that to offer during the next five years.
What's SoFi Technologies?
Never heard of it? Don't sweat it. Plenty of people haven't. It's a relatively new name by banking standards. It's also an online-only bank, meaning you've never driven by a branch and seen its sign outside.
Don't be misled, though. With the exception of face-to-face customer service, SoFi can offer all the same banking services that more traditional banks can, including loans of all types, credit cards, investments, insurance, and basics like checking and savings accounts.
NASDAQ: SOFI
Key Data Points
Online banking is nothing new, of course; the aforementioned Bank of America and Wells Fargo have offered some degree of web-based service since access to the internet became common. It was simply paired with a vast brick-and-mortar footprint.
The business is changing, though. Consumers are increasingly comfortable with not banking in person. Indeed, it's arguably the new norm. A recent survey commissioned by the American Bankers Association and performed by Morning Consult indicates that 55% of U.S. consumers are doing the bulk of their banking business via a mobile device. In-person service is the next most popular option but at a mere 8% of this crowd. The 55% are overwhelmingly happy, too, with 96% of them rating their mobile banking experience as either "excellent," "very good," or "good."
This is no trivial detail, either. As the number of digitally native consumers continues to displace those who aren't, interest in this form of self-service will only swell. Straits Research believes the global digital banking market is set to grow at an annualized pace of more than 13% through 2032, while the mobile banking sliver of the industry is poised to grow at an average yearly pace of nearly 12%.
In both instances, North America -- where SoFi operates -- is the biggest market.
This tailwind obviously benefits any banking business with online offerings. It disproportionally benefits SoFi Technologies and its shareholders, though, because this company was built from the ground up to be an online bank. It does it very well, too, if its customer growth is any indication.
Five years from now
Predicting a company's prospects is tough in a competitive industry that might look different several years down the road. Still, one can make educated guesses based on current trajectories paired with other anecdotal data.
In other words, we can at least get a rough idea of where SoFi Technologies will be by 2030.
The already-profitable online bank will likely be even more profitable than before as its revenue increases. The analyst community is calling for a 2027 top line of a little more than $4 billion, which should be enough to produce per-share earnings of $0.63. Extending this expectation from the company's current top and bottom lines would put its revenue in the ballpark of a little more than $5 billion in 2030, with per-share earnings just eclipsing the $1 mark. And bear in mind that SoFi has been more likely than not to top its sales and profit estimates.
Data sources: StockAnalysis.com and SoFi Technologies.
To reach these targets, of course, the online bank will need to continue expanding its customer base. This doesn't appear to be a problem, though, given the relentless nature of its customer growth so far. At its current trajectory, SoFi will likely be serving somewhere around 20 million customers -- about twice its current count.
Image source: SoFi Technologies' Q4-2024 earnings call presentation.
This customer growth outlook, however, arguably understates one important detail. That's the fact that most of its customers are only using one of the bank's services or perhaps only have one loan or one account with SoFi. Most banks serve their customers in more than one way, though. As time marches on and they become more comfortable with SoFi as a service provider, look for its existing customers to begin signing up for more revenue-generating products.
But is SoFi stock a buy?
The big question, of course, is whether any of this projected growth makes SoFi Technologies stock a buy.
It does, albeit one with an important footnote.
Although SoFi's story is compelling, it's not as if investors haven't responded and then some. The stock's 160% run-up from last year's low has carried it measurably above analysts' average price target of $14.46. Most of them still rate it at a "hold" as well, underscoring the argument there's little to no upside left to tap. This will likely keep things at least volatile for the foreseeable future, if not just a bit bearish.
Just remember that those analyst calls typically only look about one year to two years into the future. We're looking five years down the road. From that vantage point, SoFi shares are undervalued, making any decent dip a long-term buying opportunity.
