SoFi Technology

SoFi Technology

Company Overview

SoFi Technology (NASDAQ: SOFI) is an online banking institution offering various products and services at competitive rates. The online banking company has separated itself from its competitors with innovative AI software that has disrupted the traditional banking experience by offering seamless consumer interactions for low costs and high yield. SoFi provides products and services you would see at a traditional corporate bank and more, although they do not function like one being completely digital. Without any physical branches, SoFi lacks the overhead large corporations have, this gives them a comparative advantage in the banking industry and increased profit margins due to lower expenses.

December 4, 2024, Anthony Noto, SoFi technology CEO, announced that through the SoFi brokerage account users will have the opportunity to invest in companies that are not publicly traded through various funds with their relationship with Templum. Some of the private companies include OpenAI, SpaceX, and Epic Games, all high valued accomplished private companies. Private investment is not something retail investors have had access to in the past without substantial capital, this will increase membership growth as investors may be attracted to this specific service.

Growth

SoFi joined the NASDAQ in August of 2021 and since then they have shown impressive growth metrics. The stock has performed well in the last year due to its strong earnings reports that have indicated both profitability and future growth potential. SoFi technology has reported seventeen straight quarters of at least 20% growth. Within the past few years, a consistent revenue positive trend has been seen with SoFi earnings reports. The company has the characteristics and the business plan to rise to the top, Anthony Noto has a bullish outlook on the future of the company stating that one day SoFi will be a top ten bank. SoFi has displayed signs of strong growth potential, such as positive cash flow, rapid expansionism, quarter to quarter growth and a consistent increase in consumption. SoFi’s membership has expanded fairly consistently over time, membership increased from 6.96M on September 30, 2023, to 9.37M on September 30, 2024. Segment contribution-segment revenue minus segment costs- for financial services increased from 3.26M September 30, 2023, to 99.76M September 30, 2024. This data indicates overall company expansion, as well as increased sales, and reduced costs. Segment contribution being an important metric for evaluating company profitability makes it evident that SoFi value and company size have increased considerably.

Politics

With Trump being inaugurated in the coming year the door is open to restructure or get rid of the SAVE plan, as well as restructuring of how much the government will continue to be involved in student lending. With congressional officials opposed to SAVE due to high cost and inability to continue to afford the large contributions expected, there is the possibility the plan disappears entirely. Trump's approach to the inflated cost of tuition is to take away preferential tax status which will directly control costs. The future of student lending may change forever in the next year as Sam Clovis, Trump campaigns national co-chair and policy director said “should be marketplace and market driven” when asked about the loan system. The government currently lends 92% of student loans. With republicans holding the majority of congress, changes to the Department of Education and how much the government will oversee loans can be expected. The end of SAVE and restructuring of the federal Department of Education gives SoFi the opportunity to increase product sales as with these changes there will be an increased demand for loans.  

Note: banking stocks are vulnerable to high volatility due to macro shifts in the economy. Specifically, how the federal government will go about the structuring of interest rates in the coming year. According to Wall Street analysts, it is likely the Fed will issue one or two .25 basis point cuts in the year 2025, but this is not something anyone can be certain of.