SoFi Technologies, Inc. has been a standout performer in the fintech sector this year thanks to its strong financial results and strategic focus on growing its member base. The company has effectively navigated changing market conditions, maintaining growth momentum even as interest rate environments fluctuated.
SoFi recently announced a milestone of 10 million members, marking an impressive achievement in its growth strategy.
In Q3 2024, the company had 9.37 million members, representing a net addition of 627,000 members in Q4. This growth exceeds the 585,000 net new members added in Q4 the previous year, positioning SoFi for a strong December quarter.
With these figures, SoFi is expected to report 33% year-over-year member growth, potentially reaching 35%, despite seasonal challenges in attracting new members during the holiday season.
CEO Anthony Noto has long emphasized the company’s goal of reaching 20 million members. Noto emphasized at the Goldman Sachs Communacopia conference in 2022 that reaching this milestone is dependent on building trust, credibility, and awareness.
Since then, SoFi has more than doubled its member base, from 4.3 million members in Q2 2022 to over 10 million in Q4 2024.
The company projects 80% revenue growth in its Financial Services segment for 2024, while individual loan revenue is expected to remain flat compared to 2023. This shift underscores the increasing importance of member growth, rather than loan demand, in driving SoFi’s long-term strategy.
SoFi also revised its full-year adjusted net revenue guidance upward, now at $2.535 billion to $2.550 billion, compared to previous estimates of $2.43 billion to $2.47 billion.
Consensus analyst estimates for Q4 call for revenue of $677 million, up a modest 14% year-over-year. However, track record and strong demand for personal loans suggest SoFi could exceed these estimates. Notably, the company has consistently beaten consensus estimates by 3-5% in recent quarters, suggesting a potential revenue increase of $20-34 million in Q4.
SoFi is on track to meet its adjusted EBITDA target of $1.3 billion for 2026, with adjusted EBITDA projected to exceed $640 million for 2024.
The company’s current market cap of $17 billion represents a valuation of just 13 times its 2026 EBITDA target, making it an attractive opportunity for investors given its rapid growth rate and strong member acquisition metrics.
Risks to SoFi’s outlook include potential underperformance in personal loans, particularly if economic conditions weaken or a recession occurs. But SoFi’s diversified revenue streams and increasing reliance on financial services provide some insulation against these risks.
All in all, SoFi’s strong member growth, solid revenue trajectory, and increasing profitability position the stock as an attractive investment opportunity.
Even after its recent rally, the stock remains undervalued relative to its long-term potential, with clear signs that the company is on track to beat expectations for Q4 and beyond.
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*Source: Seeking Alpha
