SoFi Technologies (SOFI +2.05%) is becoming a one-stop destination for financial services. In its latest earnings report, the fintech beat expectations on revenue and earnings, and its loan business was particularly strong. The company has been building on relationships with investors clamoring to purchase its loans.
If you haven't added SoFi to your portfolio, now could be an excellent opportunity to invest in this dynamic fintech. Here are some things to consider before buying the stock today.
Image source: Getty Images.
SoFi's excellent growth continued in Q1
SoFi posted another stellar quarter, adding a record 800,000 members in the first quarter, bringing its total member count on its platform to 10.9 million. Its net revenue grew 20% to $771.7 million, while its diluted earnings per share (EPS) increased 200% from $0.02 one year ago to $0.06, marking its sixth consecutive profitable quarter.
SoFi CEO Anthony Noto said:
We delivered our highest revenue growth rate in five quarters, driven by new records in members, products, and fee-based revenue. These results demonstrate the strength of SoFi's unique strategy, combination of businesses, and product architecture, which give us a sustainable competitive advantage with the highest lifetime value per member.
NASDAQ: SOFI
Key Data Points
Growth was present across SoFi's business segments. In the lending segment, where SoFi accounts for personal, student, and home loans, revenue jumped 25% after a slow year of growth here last year. Meanwhile, contribution profits, which measure the segment-level profit (or loss), increased 15% to nearly $239 million.
SoFi's financial services segment, which accounts for its various financial services products, like SoFi Money and SoFi Invest, and fees from its loan platform business, where it originates loans for third parties, saw excellent growth as net revenue surged 101% and contribution profit increased 299% to $149.3 million.
Investors have shown an increased appetite for SoFi's loans
SoFi's net interest income grew by 24% from last year, illustrating SoFi's success with its aggressive marketing to get customer deposits to its platform. Total deposits for SoFi are now up to $27.3 billion, which have grown significantly since SoFi acquired Golden Pacific Bancorp in 2022.
SOFI Revenue (Quarterly) data by YCharts
Growth is especially noteworthy in SoFi's loan business. This was one of SoFi's slower-growing businesses last year, but has gotten a boost recently thanks to robust demand from investors for SoFi's loans.
SoFi has taken steps to expand its loan platform business, where it refers pre-qualified borrowers to loan origination partners. The growing loan platform business bolsters SoFi's ability to meet borrower demand while shifting toward less capital-intensive, fee-based revenue sources as its investor partners hold on to those loans.
Last year, the fintech agreed to a $2 billion agreement with Fortress Investment Group. It has built on this agreement further and now has up to a $5 billion commitment from the investment company. The company also finalized an agreement with Blue Owl Capital for up to $5 billion in loan commitments, showing incredibly strong demand for personal loans.
What's next for SoFi?
SoFi has added deposits at a staggering pace, has grown net interest income, and continues to churn out profitable quarters. Another positive sign for investors is that its lending was robust, thanks to strong demand for personal loans from SoFi's lending partners.
The fintech got off to a strong start to the year, and management raised its revenue forecast by $35 million and its EPS forecast from a range of $0.25 to $0.27 to a range of $0.27 to $0.28.
The stock has a price-to-earnings ratio of 31 and a price-to-tangible-book value of 3, making it expensive compared to legacy bank competitors. However, the higher valuation reflects SoFi's rapidly growing business, making it a solid stock for growth-focused investors today.
