SoFi Technologies (NASDAQ: SOFI) has taken investors on a volatile journey in recent years. But it’s trending higher, as shares have soared 106% in the past five months. The market might be pricing in the prospects of a growth spurt thanks to lower interest rates.
But it’s worth mentioning that shares still trade 44% below their peak. Is this fintech stock a buy, sell, or hold right now?
SoFi offers up a suite of financial services and lending products to customers. The company’s strength lies in its all-digital platform and its exceptional user experience. SoFi truly does successfully mix technology with finance to better serve customers.
“Meeting all of a person’s financial needs in one place with world-class products delivered seamlessly and digitally gives us a massive advantage,” CEO Anthony Noto said on the third-quarter 2024 earnings call. “This is why you will often hear me say it’s a matter of when, not if we become a top 10 financial institution.”
That’s a pretty lofty target. Consider that the 10th largest bank in the U.S., Toronto-Dominion Bank, has total assets of $400 billion. As of Sept. 30, SoFi had total assets of $34 billion. Clearly, it has a long way to go. But to the company’s and Noto’s credit, the growth trajectory is eye-popping.
SoFi expanded its customer base 35% year over year to 9.4 million in the third quarter (ended Sept. 30). In fact, that was the most customer additions of any three-month period ever. That helped spur a revenue gain of 30%.
The company depends on a land-and-expand strategy. For example, new customers might be drawn to the high yield on a savings account. Then over time, they sign up for a credit card or mortgage, deepening their relationship with SoFi and boosting the revenue potential for the company.
Noto and his team also deserve a hat tip for how they’ve turned the corner financially, getting SoFi into the black. The business has reported four straight quarters of positive earnings per share (EPS), something that investors should appreciate.
This is a clear indication that the company is starting to benefit from scale advantages. In Q3, all non-interest expenses, which primarily consist of product development, general and administrative, and sales and marketing costs, represented 91% of total revenue. That was down from a 104% share in the year-ago period (excluding goodwill impairment in Q3 2023). Despite this, SoFi has still been able to grow at a rapid pace. That’s certainly an encouraging development.