SoFi (SOFI +3.27%) has been an excellent investment over the past year and a half or so. In fact, since mid-2024, the stock has more than quadrupled thanks to not only excellent growth momentum but better-than-expected profitability. However, there's a solid case to be made that it could still have a lot of growth potential in the years to come. The stock closed Friday's trading at $26.54.
With that in mind, here's a rundown of the current state of SoFi's business, the online bank's future opportunities, and what it could mean for investors if management can execute on its vision of becoming a top 10 financial institution.
SoFi's incredible momentum and what could come next
Over the past three years, SoFi has tripled its membership base despite a generally difficult environment for growth. In the latest quarter, SoFi's adjusted EBITDA (earnings before interest, taxes, depreciation, and amortization) nearly doubled year over year, and profitability on a generally accepted accounting principles (GAAP) basis is growing faster than analysts expected. Not only that, but despite the rapid growth, SoFi's credit quality is heading in the right direction, with its personal loan net charge-off rate declining by 90 basis points over the past year.
Image source: SoFi Technologies.
One especially interesting area to watch is SoFi's fee-based revenue, which grew by 72% year-over-year in the second quarter and now makes up 44% of the company's total, up from just over one-fourth of revenue a couple of years ago. This includes capital-light revenue sources like the loan platform business, which originates loans on behalf of third parties and generates referrals for partners.
SoFi aims to be able to do everything its prospective members' current banks do, and then some. And there's a lot that SoFi doesn't offer yet, some of which we know is in the works. For example, SoFi announced that cryptocurrency trading will return to its investment platform by the end of 2025, and the bank is starting to roll out cross-border, blockchain-enabled money transfers. There are also some more traditional banking products like CDs, auto loans, small business loans, and certain types of investment accounts that aren't currently offered, and the company's credit card business has massive untapped potential.
It's also worth noting that if the Trump administration follows through with plans to privatize parts of the $1.6 trillion federal student loan portfolio, it could create big opportunities for SoFi. After all, SoFi started out as a private student lender and has all the necessary technology in place to service federal loans if the opportunity arises.
This might not even be SoFi's largest loan opportunity. Home loans grew 92% year-over-year in the second quarter but are still a relatively small part of the company's lending operation. But with interest rates likely to fall over the next few years, massive pent-up demand for home purchases, and $35 trillion in home equity in the United States, this could grow into a big part of the business.
This could be just a starting point. Most Americans are still unfamiliar with SoFi's brand and what the company does, but the company is taking big steps to change this. If the company keeps growing and innovating, it could achieve its goal of becoming a top 10 financial institution, and sooner than you might think.
Will buying SoFi below $30 make investors richer?
Of course, if we knew what stocks were going to skyrocket, we could all be wildly rich.
Having said that, SoFi is a fast-growing financial institution that is making great progress with its plan to disrupt the traditional banking industry. With incredible momentum, massive growth potential, and a friendly regulatory environment, SoFi could have a very bright future ahead of it. I think it's a buy trading just under $30 per share as it is on Monday afternoon.
