Shares of SoFi Technologies (SOFI 5.03%), the online bank, have been on a wild ride since the company went public back in 2021.
While SoFi's share price is currently down about 25% from its initial public offering (IPO), the company has made significant strides lately. This is largely due to the company's growth in customers and revenue, indicating a positive trajectory for the company.
SoFi also reached a significant milestone in the fourth quarter of last year, achieving its first profitable quarter.
But what should investors expect for this online bank in the coming year? Let's take a closer look at what SoFi's doing and how it could set the company up for future success.
New products and new growth
SoFi's original business was built around student loans, but when the pandemic came along and many student loan repayments were paused, the company had to improvise.
SoFi now offers a broad range of financial products to customers, including mortgages, credit cards, personal loans, checking and savings accounts, and brokerage services. This expansion has paid off for SoFi. In 2023, the company's members (its term for customers) increased by 44% to 7.5 million and revenue rose 35% to $2.1 billion.
And the good times haven't slowed down. SoFi added 622,000 new members in the first quarter of 2024, an increase of 35% from the year-ago quarter. That puts SoFi's total members at 8.1 million -- a 44% increase from the first quarter of 2023.
A profitable business
SoFi achieved a significant milestone in the fourth quarter of 2023, becoming profitable under generally accepted accounting principles (GAAP). This marked a turning point for the company, generating a net income of $47.9 million, a substantial improvement from a net loss of $40 million in the year-ago quarter.
Image source: Getty Images.
One profitable quarter is good, but it's usually not enough to prove a company is out of the woods. That's why it was great to see SoFi report $88 million in net income in Q1 2024 and for the company's leadership to estimate even more in the coming quarters.
SoFi's management issued a net income forecast in the most recent quarter, saying it will be between $165 million and $175 million for 2024.
Where SoFi is headed
SoFi has increased the financial products and services it offers and has convinced more customers to sign up for them. That's no easy task, especially when its core business, student loans, slowed during the past couple of years.
Even more impressive is that SoFi has been profitable for two consecutive quarters and management's projections suggest they expect that trend to continue.
This puts SoFi on a solid trajectory during the next year and likely beyond. SoFi's leadership estimates that GAAP earnings will be between $0.55 and $0.88 per share in 2026.
With SoFi's share price down about 14% during the past year, the company's shares are trading at a bit of discount right now. The stock's price-to-sales ratio is just 3.4 now, well below its highs in 2021 and lower than 4.4 around this time last year.
All of the above indicate that SoFi is on the right path and will likely stay on it during the next year. If you're willing to take on a little risk while you wait to see how SoFi's next few quarters play out, now might be a good time to open a small position with SoFi.
