SoFi Technologies (SOFI 4.00%) hasn't had a long run in the public markets. But it's definitely getting the attention of the market. While shares have been extremely volatile at certain times, they have boosted portfolio returns. In the past year, they have skyrocketed an astonishing 235% (as of Aug. 28).
This fintech stock trades near its all-time high these days. Investors can no longer ignore this booming business, as it deserves consideration. But a long-term mindset is still required.
Where will SoFi be five years from now, in 2030?
Image source: Getty Images.
SoFi's momentum is hard to ignore
You wouldn't be able to tell from SoFi's latest financial results that the U.S. is dealing with general economic uncertainty. This digital bank is growing quickly, with momentum picking up. Revenue increased 43% in Q2 (ended June 30), accelerating from the pace in the first quarter. In fact, SoFi's revenue of $855 million last quarter was 136% higher than in the same period three years ago.
SoFi now has 11.7 million customers. Exactly three years ago, it had 4.3 million. That monster gain demonstrates just how popular SoFi's products and services are. The company offers checking and savings accounts, brokerage services, insurance, and various loans, among other things. By building its business with technology, data, and a digital-only model in mind, SoFi has been able to scale up quickly, as it prioritizes giving its customers an exceptional user experience.
Innovation is part of management's strategy to keep focusing on what its customers want. In March 2023, during the regional banking crisis, the company offered FDIC insurance up to $2 million. SoFi is becoming a more trusted brand. It currently has nearly $30 billion in deposits, up 28% year over year.
Additionally, the business is pushing forward into the crypto space, thanks to a more accommodating regulatory backdrop. SoFi will reintroduce crypto trading on its platform. And it just announced a partnership with Lightspark to enable faster and cheaper cross-border money transfers using Bitcoin's lightning network. Expect product and service offerings to keep expanding over the next five years.
The company's revenue growth is impressive and continues to get a lot of the attention. However, investors should start focusing on SoFi's profitability trends. SoFi's non-GAAP diluted earnings per share soared 700% year over year to $0.08 in Q2. Executives raised guidance based on the company's strong momentum. They now forecast adjusted net income of $370 million in 2025. That would be 63% higher than the prior year.
After years of losing money, SoFi has clearly turned the corner from a financial perspective. It has proven that its business model is scalable. The bottom line should keep rising in the years ahead, with earnings likely being notably higher in 2030.
NASDAQ: SOFI
Key Data Points
The chance to beat the market
In the past five years, the S&P 500 has generated a total return of 100%. This is a fantastic result. Assuming this performance repeats over the next five years, investors will have to find stocks that can produce an annualized gain of greater than 15% if they want to beat the market. This is no easy task.
But to be clear, SoFi has the potential to do just that, in my view. The company's revenue growth has been outstanding, which has supported its improving profitability. Management believes earnings per share (EPS) will increase at a compound yearly rate of 20% to 25% in the years after 2026. This trend would provide a major tailwind for the stock to rise, but that estimate could be conservative given SoFi's impressive profits.
I believe that bottom line's potential makes the current valuation more reasonable. Shares trade at a price-to-earnings ratio of 54.3. That certainly doesn't look like a bargain, and it's 43% more expensive than just six months ago, which highlights the market's exuberance toward the business. However, if SoFi can keep growing its EPS at a strong clip in the years ahead, the stock has a good shot at outperforming the market between now and 2030.
