SoFi Technologies (SOFI -2.75%) stock ended 2024 on a high note, up 55%. That was a huge success for a stock that had doubled in 2023 but then tumbled as 2024 started. It proved itself over the year, becoming more and more profitable, adding millions of new members, and growing its non-lending services. To top it off, even its lending business, which is what was worrying the market, looks like it's ending the year in better shape than management was planning for.
In other words, everything is going well for this powerhouse fintech stock. But if you're still on the fence about it, you might want to take the leap before Jan. 27.
A powerhouse fintech stock
SoFi is the quintessential fintech, or financial technology, stock. It offers users an easy-to-use app with a full array of financial services that they can access on a smartphone, from bank accounts and lending products to credit cards and investment tools. It's a one-stop-shop where members can manage all of their financial needs a for seamless, simple experience.
SoFi's core segment is lending, which was its first segment. But management has what it calls its financial services productivity loop strategy, which involves bringing in customers for one product and then upselling and cross-selling them to more and higher-priced products. It has two non-lending segments, comprising the financial services segment and the tech platform, which is a financial infrastructure business under the banner Galileo that it acquired in 2020. Management calls it the "Amazon Web Services (AWS) of financial services."
The strategy is working. Users engage with SoFi's platform at a high rate, and the non-lending segment continues to grow faster than the lending segment, leading to their accounting for a higher amount of the total business -- sales increased 64% year over year and rose from 39% of the total to 49% of the total in the 2024 third quarter. Revenue per product increased from $53 last year to $8 this year.
They're also pulling more of their weight in profits. When SoFi posted its first quarterly net profit in the 2023 third quarter, it mostly came from the lending segment. A year later, all of the segments are profitable, and financial services profits are skyrocketing.
| Time | Lending contribution profit | Financial services contribution profit | Tech platform contribution profit | Total company net income |
|---|---|---|---|---|
| Q3 2023 | $204 m | $3.3 m | $32 m | $(267) m |
| Q3 2024 | $239 m | $100 m | $33 m | $61 m |
Data source: SoFi quarterly reports.
You can see that lending is still responsible for the lion's share of the total, which is why the market is paying careful attention to it more than the expansion benefits. There's been good news on the lending side, though, too. As interest rates come down, SoFi's lending segment is improving, and it's expecting an increase in lending revenue for the full year.
What happens on Jan. 27?
SoFi reports fourth-quarter earnings on Jan. 27. So far, it has a great track record of undercommitting and overdelivering. If it comes through again, the stock could soar after earnings.
New investors should also be aware that the market tends to send SoFi stock up on good news and then send it back down after the rush. There's been a lot to unpack in each report; the member and product add-ons, revenue growth, and profit increases have been uniformly stellar for the past four quarters, but digging deeper, the lending segment has complex reporting including originations, defaults, sales, and income. That's likely why a quick survey looks strong, and a longer peruse looks more nuanced. However, after the third-quarter results, when market concerns about the lending segment were assuaged, the stock stayed up.
In fact, it's gotten so high since the Federal Reserve lowered interest rates in September that it's coming down again as earnings get closer. This could be an excellent time to buy in. But don't buy it for a short-term boost, and don't worry if it goes back to a pattern of falling after jumping. Ride out the waves, and let the long-term opportunity grow your investment.
