SoFi (SOFI +1.75%) was one of the best-performing stocks of the financial sector in 2024, with shares rising 55% for the year. And it continued to rise for the first several weeks of 2025.
However, the stock has slumped lately, and shares are more than 25% below their January high. But I think SoFi could be a buying opportunity while the current price remains, and here's why.
The recent news has all been good
Despite the pullback in the stock price, the recent news to come out of SoFi has generally been strong.
NASDAQ: SOFI
Key Data Points
We'll start with the company's latest earnings report, which is what started the downward move. Most of the concern has to do with weaker-than-expected guidance, but it's important to know that SoFi entered 2025 with excellent momentum. In 2024, SoFi's membership base grew by 34% to 10.1 million, about three times as many members as it had at the end of 2021. The business produced record loan originations despite a persistent high-interest environment, and revenue grew by 26% year over year. On the bottom line, 2024 was SoFi's first full year of profitability.
Since the earnings report, there have been several good news items. The company expanded its SoFi Plus premium membership, announced a nearly $700 million loan securitization from assets on its balance sheet, and also announced a $5 billion commitment from Blue Owl Capital to expand the loan platform business.
Aside from SoFi's guidance, which actually called for better-than-expected revenue lower earnings than analysts were hoping for, there isn't much to justify a 25% haircut in the stock.
Looking ahead
SoFi still has plenty of room to grow and expand its customer relationships. It has about $26 billion in deposits, which is impressive considering that it started from zero, but this is far less than 1% than what some of the largest U.S. banks have. There's room to expand its product lines, especially when it comes to credit cards and other types of consumer loans,
SoFi could also be a major beneficiary of falling interest rates over the next couple of years. The bank currently has an average cost of 3.8% on its interest-bearing deposits, and this should come down considerably if rates fall, resulting in more attractive margins. Plus, lower rates are also a positive catalyst for loan demand.
Finally, SoFi could be a big winner in a lower-regulation environment. The Trump administration is widely expected to gradually loosen regulations over the coming years, and now that it's a profitable bank, SoFi could be a winner if there are corporate tax cuts.
Not a low-risk stock
Looking ahead to the rest of 2025, there are some specific areas I'll be watching. The Galileo technology platform is one interesting area that is starting to gain serious momentum. And the third-party loan origination platform is creating a fast-growing stream of high-margin, low-risk fee income.
SoFi isn't exactly a low-risk stock. It trades at a higher price-to-book multiple than other major bank stocks -- but it does have a higher growth rate than most. It is also a highly cyclical business, and in tough times SoFi could see default rates spike higher and loan demand weaken.
To be sure, if the economy falls into recession, or if consumer spending is weaker than expected in the near term, SoFi's stock could certainly be volatile. But with fantastic growth momentum, a large opportunity, and a discount of more than 25% from recent highs, SoFi could be worth a closer look for patient long-term investors.
