SoFi Technologies (SOFI -5.44%) has been a major winner in the past 12 months. Shares are up just over 100% since early June 2024, highlighting how the business is winning over investors in remarkable fashion. But to be fair, it has been a volatile stretch.
This leading digital bank hardly flies under the radar anymore. It's doing a great job bringing on new customers, especially as it continues innovating with new products. Shares currently trade 45% below their peak, though.
Investors should consider what the future might hold. Where will this top fintech stock be in five years?
Image source: SoFi Technologies.
Becoming a top 10 financial institution
CEO Anthony Noto, who has an impressive background working for the National Football League, Goldman Sachs, and Twitter (now X), has high hopes for his company. "Meeting all of a person's financial needs in one place with world-class products delivered seamlessly and digitally gives us a massive advantage," he said on the 2024 third-quarter earnings call last October. "This is why you will often hear me say it's a matter of when, not if, we become a top 10 financial institution."
It's not exactly clear what metric Noto is focused on with this goal. It could be market cap, revenue, or assets, for example. Nonetheless, it's strikingly clear that SoFi still has a long way to go.
According to Federal Reserve data, the 10th largest bank in the U.S. by assets is State Street. As of March 31, it had $368 billion in total assets on its balance sheet, more than 10 times bigger than SoFi.
It's part of every CEO's job to drive investor excitement. But from Noto's perspective, it's easy to be optimistic about what SoFi could look like in the future. That's because growth has been superb.
The business added 800,000 net new customers last quarter, with the total count approaching 11 million. And SoFi's first-quarter adjusted net revenue of $771 million was more than it brought in for all of 2020.
I'm confident that by 2030, SoFi will be a much larger financial services entity. It should have more customers, more products, higher revenue, and higher profits. Based on the company's success, it's difficult to think any other way.
However, there could still be some risks that affect SoFi's success over the next five years. For one, the culture of product innovation could weaken and pressure customer growth.
What's more, management could loosen up lending standards and its risk management in the name of faster expansion. So far, though, there's nothing concerning, but investors should be mindful of risk factors.
SoFi stock in 2030
As of this writing, this stock trades at a price-to-earnings ratio (P/E) of 34.9. This appears to be an expensive valuation, but there's more to it than meets the eye.
Management believes that profits will soar. It's expected that in 2026, earnings per share (EPS) will be $0.68 at the midpoint. And in the years after that, the company thinks EPS will grow at a compound annual rate of 20% to 25%. Based on these forecasts, EPS will total $1.25 in 2030.
Let's assume the P/E contracts to 23.4 in 2030, which is the current multiple of the S&P 500. I believe this could be a conservative view. Then, we're looking at a stock price of $29.25 at the end of the decade.
Of course, this is a rough estimate, but it shows that SoFi Technologies shares could return 105% in the next five years. No one will argue with that kind of performance.
