We came across a bullish thesis on SoFi Technologies, Inc. (SOFI) on Substack by Data Driven Investing. In this article, we will summarize the bulls’ thesis on SOFI. SoFi Technologies, Inc. (SOFI)’s share was trading at $16.18 as of Feb 19th. SOFI’s trailing and forward P/E were 41.49 and 69.88 respectively according to Yahoo Finance.
A businessperson checking their laptop, highlighting the company’s integration of technology across its banking and financial services.
SoFi’s Q4 earnings report highlighted both strengths and areas of concern, presenting a nuanced outlook for 2025. Member growth remained impressive, with 785,000 new additions, slightly below the 800,000 expected, but still an all-time high. After accounting for churn, net new members stood at 754,000, reinforcing SoFi’s ability to acquire users at low cost. With increased investment in brand awareness planned for 2025, management believes a quarter with one million new members is achievable, particularly in the latter half of the year. CEO Anthony Noto has emphasized that brand recognition remains the primary constraint on growth, and resolving this could unlock significant user expansion.
Loan originations were a standout, exceeding expectations across all categories. Personal loans hit a record $5.25 billion, well ahead of the $4.55 billion forecasted, while student loan originations reached $1.35 billion, their highest level since Q4 2021. Home loans also performed well, coming in at $577 million, far surpassing estimates. The resumption of student loan payments provided an unexpected boost, and a favorable interest rate environment likely supported home loan originations. This momentum positions SoFi for continued loan growth into 2025.
Deposit growth remained a bright spot, with demand and savings deposits increasing by $2.09 billion, nearly matching expectations, while time deposits declined by $662 million. Importantly, deposit growth continued despite a decrease in SoFi’s APY from 4.6% to 4.0%, dispelling concerns that interest rates are the sole driver of deposit inflows. SoFi’s comprehensive ecosystem—including Zelle integration, overdraft protection, and early paycheck access—has strengthened customer retention. Management believes these features provide a differentiated banking experience beyond just competitive interest rates.
Lending revenue outperformed significantly, reaching $423 million versus the expected $365 million. The strong performance was driven by rising net interest income and stable noninterest income. SoFi had initially projected a decline in lending revenue for 2024, assuming economic headwinds, but with GDP growth steady and unemployment lower than anticipated, the company instead saw an 11% revenue increase. This highlights SoFi’s resilience in navigating macroeconomic conditions.
Financial services revenue came in slightly below expectations at $256.5 million compared to the projected $259 million. This was due to a small decline in revenue per member, marking the first time this metric has dropped since SoFi became a bank. However, the overall trajectory remains strong, and the upcoming Blue Owl Capital deal is expected to provide a major boost. Once the deal closes, originations are projected to increase to $1.7 billion–$1.8 billion per quarter, positioning SoFi’s lending platform as a formidable competitor to fintech peers like LendingClub and Upstart.
The tech platform segment, particularly Galileo, remains a weak spot. Revenue of $102.8 million fell short of the expected $112.5 million, continuing a trend of underperformance. While new contract wins have been announced, execution remains a concern. The segment will need to demonstrate sustained improvement before investors regain confidence.
Despite these challenges, SoFi’s stock remains attractive due to its strong lending and deposit growth, de-risked guidance, and long-term strategic investments. The company’s 2025 revenue guidance of $3.2B–$3.275B significantly exceeded analyst expectations of $3.02B. However, its EPS guidance of $0.25–$0.27 came in slightly below estimates of $0.28, largely due to aggressive tax planning, reinvestment, and conservative macroeconomic assumptions. SoFi utilized all available loss carryforwards, leading to an assumed 26% tax rate moving forward. Without this change, guided EPS would have been closer to $0.33, aligning with prior projections. While this move increases future tax liabilities, it also provides an immediate capital infusion of approximately $270 million, allowing SoFi to hold an additional $1.8 billion in assets without impacting capital ratios. This could generate an additional $100 million in annual net interest income, effectively landing in SoFi’s lap.
Management’s decision to reinvest heavily rather than maximize short-term profitability reflects its long-term vision of becoming a dominant one-stop financial platform. While some investors may have preferred a higher EPS, prioritizing market share growth over near-term earnings aligns with SoFi’s strategy. CEO Anthony Noto emphasized that these investments in brand awareness, product development, and technology will yield outsized returns over time. Additionally, SoFi continues to incorporate conservative macro assumptions into its guidance, forecasting a 5% unemployment rate by year-end—far more bearish than the Federal Reserve’s 4.5% projection. This mirrors last year’s approach when SoFi guided conservatively but ultimately exceeded expectations. If economic conditions do not deteriorate as much as projected, SoFi is likely to outperform once again.
Leadership’s commitment to long-term success is further reinforced by CEO Anthony Noto and CFO Chris Lapointe’s approach to stock-based compensation. Their performance stock units are tied to financial milestones, yet they prioritized reinvestment over short-term stock price gains, demonstrating alignment with shareholder interests.
SoFi’s 2025 outlook reflects a balanced approach of prudence and ambition. The company’s expanding member base, disciplined financial planning, and strategic investments position it for sustained growth. With a strengthened balance sheet, strong lending performance, and potential upside from brand awareness initiatives, SoFi is well-positioned to exceed expectations in the coming year. If execution improves, particularly in Galileo, SoFi’s stock could see significant appreciation.
SoFi Technologies, Inc. (SOFI) is not on our list of the 30 Most Popular Stocks Among Hedge Funds. As per our database, 43 hedge fund portfolios held SOFI at the end of the third quarter which was 31 in the previous quarter. While we acknowledge the risk and potential of SOFI as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than SOFI but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article was originally published at Insider Monkey.