SoFi has delivered excellent results in its business for several years.
With nearly 11 million members and growing profitability, SoFi looks ready to jump to the next level.
If SoFi grows to become a top 10 financial institution, it could be a massive home run for investors.
Banking disruptor SoFi Technologies(NASDAQ: SOFI) has grown at an impressive pace in roughly four years since it became a publicly traded company. The company's membership base has more than tripled since the end of 2021, SoFi's banking platform has grown from zero at the start of 2022 to more than $27 billion in consumer deposits today, and its adjusted EBITDA in 2024 was about 23 times what it was just three years prior.
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Even after this fantastic growth, SoFi remains a relatively small financial institution. It is currently the 63rd largest U.S. bank by assets, according to Federal Reserve data. Not only does it have tons of room to grow its customer base and relationships, but there are also some extremely promising growth drivers that investors should know about.
Is SoFi ready to jump to the next level?
In the first quarter of 2025, SoFi grew its revenue by 33% year-over-year, posted its highest earnings per share yet, and added about 800,000 new members – the most it has ever added in a single quarter.
However, 10.9 million members still gives the company tons of room to grow, and management is doubling down on its brand awareness efforts. As one example to show how small SoFi still is, consider that online financial institution Discover(NYSE: DFS) has about 300 million open accounts.
There are some particularly interesting potential catalysts to keep an eye on:
The average SoFi member has just 1.4 products with the company. A product is something like a bank account, loan, or credit card. The focus has understandably been on growing the membership base, but this has created massive potential to cross-sell products and services to existing members.
SoFi is rapidly scaling its third-party loan origination platform, which requires none of its own capital but generates a low-risk, high-margin stream of fee income.
SoFi's core lending business is personal loans, but its student loan and home loan originations increased by 58% and 54%, respectively, in the most recent quarter. If interest rates start to fall, the home loan segment could be a particularly interesting opportunity, especially when it comes to refinancing, as Americans are sitting on more home equity than ever before.
These are just a few examples. But the point is that there are some big catalysts that could help SoFi continue to grow its business and become more profitable in the coming years.
Can SoFi stock produce life-changing wealth?
With a valuation of 2.9 times tangible book value and about 50 times forward earnings as of this writing, SoFi is not exactly a cheap bank stock. However, considering its momentum and high net interest margin, SoFi could be a massive home run if it can deliver on its growth strategy.
SoFi's management has previously stated that its goal is to grow to the point where it is a top 10 financial institution.
For context, the 10th largest commercial bank in the United States today is TD Bank(NYSE: TD), which has about $373 billion in domestic assets. SoFi has $37.7 billion in total assets, so it would need to grow tenfold in size to break into the top 10 list. (Note: TD is roughly one-tenth the size of the largest U.S. bank, JPMorgan Chase.)
If SoFi were to achieve such scale, the business would probably be a highly valued one. For one thing, SoFi is rapidly building out the asset-light parts of its business, such as the third-party loan platform, and these could conceivably scale to a large size as well. Plus, the nature of SoFi's loan portfolio as well as its low cost structure gives it the potential for a higher return on assets than the typical bank. In fact, every single one of the 10 largest U.S. banks is primarily branch- or office-based.
In other words, if SoFi were to increase tenfold in size, in terms of assets, it would probably command a higher valuation than the other large U.S. banks. Therefore, if management can achieve its goal and reach a top 10 position within the next decade or two, its stock could potentially produce life-changing wealth for investors.
Should you invest $1,000 in SoFi Technologies right now?
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JPMorgan Chase is an advertising partner of Motley Fool Money. Discover Financial Services is an advertising partner of Motley Fool Money. Matt Frankel has positions in SoFi Technologies. The Motley Fool has positions in and recommends JPMorgan Chase. The Motley Fool recommends Discover Financial Services. The Motley Fool has a disclosure policy.
