SoFi: $25 In 2025 Is Not Unreasonable
After spending two years trading in a tight range below $10, SoFi Technologies, Inc. (NASDAQ:SOFI) finally broke out to a new 52-week high in 2024, delivering a market-beating return of 55%.
Summary
Following its fourth-quarter earnings release, SoFi stock declined due to mixed guidance.
Management provided strong revenue guidance but a softer outlook for EPS.
Historically, management has sandbagged guidance, and analysts have repeatedly underestimated the company.
These low expectations set an easy bar for SoFi to exceed.
Introduction
Improving market sentiment—fueled by interest rate cuts and President Trump’s reelection—provided favorable tailwinds for the stock.
A major catalyst for the breakout arrived when SoFi reported exceptional Q3 earnings, pushing shares above the $10 threshold. Even after soaring 100% from the August lows of $6 per share, I argued that the stock still had the potential for a significant move higher following its Q3 report.
Indeed, the stock advanced another 50%, moving from $12 to $18.
Unfortunately, the rally abruptly paused after SoFi released its Q4 and FY2024 earnings results, which sent the stock 10% lower the next day.
Despite this negative market reaction, I believe SoFi remains undervalued. Other than its somewhat mixed guidance, there’s nothing in the report to justify the sell-off. In my view, this pullback is simply a short break on the way to higher highs.
Growth: Sandbagging Tactics
In its most recent report, SoFi closed out 2024 with $734 million in Q4 revenue, a 19% year-over-year increase, surpassing analyst expectations by a wide $52 million. Adjusted revenue came in at $739 million, up 24% year-over-year, exceeding the high end of management’s guidance by $56 million. This robust performance highlights strong demand for SoFi’s products and services.
Membership Growth
The company ended 2024 with 10.1 million members, a 34% year-over-year increase, surpassing the important 10 million mark.
785,000 new members were added in Q4 alone, a quarterly record that underscores SoFi’s compelling value proposition and the ongoing shift toward digital financial platforms.
Product Adoption
SoFi reported an additional 1.1 million new products in Q4, reaching a total of 14.7 million—a 32% year-over-year increase.
Products per member remained roughly flat at 1.46, meaning SoFi’s cross-selling opportunity is still immense given that it offers nine major products.
Segment Performance
All three business segments recorded record revenues:
Financial Services
Revenue: $257 million (+84% YoY)
Net interest income: $160 million (+47% YoY), driven by growing consumer deposits.
Non-interest income: $96 million (+220% YoY), fueled by:
A 63% YoY increase in interchange fees ($14+ billion in annualized payment volume).
Rapid growth in the Loan Platform Business, which generated $63 million in loan platform fees during Q4 (up from $56 million in Q3) on $1.1 billion of personal loans originated for third parties.
The Financial Services segment continues to gain traction as SoFi broadens its offerings beyond its legacy Lending business. With upcoming products such as Zelle integration, alternative investment options (through its partnership with Templum), and a robo-advisor platform (in partnership with BlackRock), SoFi is positioned to attract new members and drive robust revenue growth.
Lending
Adjusted revenue: $423 million (+22% YoY), with growth accelerating for the third consecutive quarter.
Total loan originations: $7.2 billion (+66% YoY), driven by strong demand for home loans, personal loans, and student loans (volumes grew 87%, 63%, and 71%, respectively).
Now that macroeconomic conditions have improved, SoFi is ramping up its lending operations. With a favorable outlook for 2025, this momentum could continue.
Tech Platform
Revenue: $103 million (+6% YoY)
Tech Platform Accounts: 168 million (+15% YoY)
Growth in this segment can be lumpy due to elongated sales cycles. However, recent developments provide a promising outlook:
Galileo was chosen by the U.S. Department of the Treasury to power its Direct Express prepaid debit card program.
A large U.S.-based financial services provider signed on, expected to become a top-10 client by revenue.
A co-branded card partnership with a leading hotel rewards brand.
While revenue from these deals won’t materialize until 2026, they strengthen the “AWS of Fintech” narrative. Over time, these larger, more predictable deals will boost the Tech Platform segment.
Strong Outlook, Yet Possibly Understated
Thanks to these growth drivers, SoFi provided robust revenue guidance for 2025:
Q1 Adjusted Revenue: $745 million at the high end (+28% YoY), topping analysts’ $708 million estimate.
FY2025 Adjusted Revenue: $3.275 billion at the high end (+26% YoY), beating the $3.050 billion consensus.
FY2025 New Members: 2.8 million (28% YoY increase).
Despite these strong forecasts, SoFi’s management has a history of issuing conservative (“sandbagged”) guidance. Their current guidance assumes:
~1.5 rate cuts (in line with the forward curve), whereas the Fed plans two cuts this year.
GDP growth of 1–2%.
Unemployment normalizing around 5%.
Stable credit spreads and consumer credit conditions.
In early 2024, management guided for 14–16% revenue growth, but actual growth came in at 26%—a full 10 percentage points higher than the upper estimate.
With that track record, it’s not unreasonable to expect SoFi to grow at closer to 30% in 2025.
Profitability: More Evidence of Sandbagging
Contribution profit reached a record $393 million in Q4 at a 53% margin, improving 6 percentage points year-over-year.
Lending: $246 million (+58% margin), down 7pp YoY, likely due to a 20% decline in non-interest income and a 47% increase in direct expenses.
Tech Platform: $32 million (+31% margin), relatively flat over the past few quarters.
Financial Services: $115 million (+45% margin), up 27pp YoY but only 3pp sequentially. While margin expansion here may slow, achieving 50%+ margins over the long run remains plausible.
Adjusted EBITDA came in at $198 million (27% margin). However, incremental adjusted EBITDA margin dropped to 12% (down 62pp YoY and 44pp QoQ) amid a 31% spike in sales and marketing expenses. Management expects incremental adjusted EBITDA margin to average around 30% in 2025 as the company continues investing for growth.
Net income for Q4 was $332 million, including a one-time benefit of $271 million related to deferred taxes. Excluding that, adjusted net income stood at $61 million (8% margin), flat year-over-year. Adjusted EPS of $0.05 beat consensus by a penny.
Guidance and Analyst Estimates
Profitability is expected to dip slightly before improving again:
Q1 2025
Adjusted EBITDA: Up to $185 million (25% margin), below consensus of $202 million.
Net income: Up to $40 million (5% margin).
EPS: $0.03, versus $0.06 expected by analysts.
FY2025
Adjusted EBITDA: Up to $865 million (26% margin), below estimates of $914 million.
Net income: Up to $305 million (9% margin).
EPS: Up to $0.27, compared to $0.29 estimated.
Keep in mind, these numbers incorporate a 26% effective tax rate. In response, analysts have cut their EPS projections for FY2025 from $0.29 to $0.25. But, given SoFi’s track record of outperforming, these new forecasts might be overly conservative.
In early 2024, management guided for FY2024 EPS of $0.08 (high end), yet SoFi delivered $0.15—nearly double.
Since going public, SoFi has beaten analyst EPS estimates in all but one quarter, and that one miss was attributed to a large, one-time goodwill impairment (had it not been for that, it would have been a beat).
Thus, SoFi’s decision to favor long-term growth over short-term profits is a positive move, particularly as the company is now profitable and carries a healthy balance sheet. Management also reiterated its 2026 EPS target of $0.55 to $0.80 and projects 25% annual EPS growth beyond 2026.
“We now expect to exceed our medium-term guidance of delivering 20–25% compounded annual revenue growth through 2026, and remain confident in delivering 2026 EPS in the range of $0.55 to $0.80. Moreover, we are well positioned to deliver 20–25% annual EPS growth beyond 2026.”
— CFO Chris Lapointe, SoFi FY2024 Q4 Earnings Call
If SoFi continues to execute as well as it has, meeting or exceeding the high end of both 2025 and 2026 targets appears likely. The persistent underestimation by analysts could serve as a catalyst for further stock price appreciation once actual results surpass these lowered expectations.
Health: Solid Credit Performance
SoFi’s balance sheet keeps strengthening:
Total Loans: $27.5 billion (+$0.9B QoQ)
Total Deposits: $26.0 billion (+$1.6B QoQ)
Total Debt: $3.1 billion (-$0.1B QoQ)
Deposit growth enables SoFi to fund loans more affordably than using debt. In Q4, SoFi’s deposit rate was 193bps lower than its debt financing, translating to $500 million in annual interest expense savings. Net interest margin was 5.91% in Q4, up 34bps sequentially (though down 11bps YoY).
Improving Credit Metrics
Recent loan vintages (from Q4 2022 to Q1 2024) have net cumulative losses (NCL) of 3.81% with 45% unpaid principal balance remaining, better than the 5.25% NCL for the 2017 cohort at the same stage.
At 45% remaining principal, this represents a 144bps improvement relative to 2017’s performance—a 15bps improvement from Q3 to Q4.
For loans issued from Q1 2020 to Q3 2024, 58% of principal has already been paid down at an NCL of 6.5%, which is below the 7–8% maximum NCL target. Reaching an 8% NCL for this cohort would mean the remaining 42% of unpaid balance defaults at more than 10%, which is highly unlikely.
In short, SoFi’s loan portfolio remains on solid ground.
SoFi also grew tangible book value (TBV) by $465 million in Q4, to $4.9 billion (+39% YoY). TBV per share was $4.47 (+24% YoY). Management’s TBV growth guidance for 2025 is $550–$575 million, but again, this could be conservative—original guidance for 2024 was $300–$500 million, while actual growth totaled $1.4 billion.
Valuation: Raising the Price Target
Since August of last year, SoFi’s stock has jumped more than 150%. With a price-to-tangible-book-value (P/TBV) ratio of around 3.8x, the stock trades at a premium to legacy banks like JPMorgan and Bank of America. This premium is justifiable given SoFi’s higher growth trajectory and greater earnings potential.
I am raising my base-case price target from $16 to $20, reflecting stronger-than-anticipated growth. Below are the assumptions in my discounted cash flow (DCF) model:
FY2034 Revenue: $12.8 billion, assuming 24.5% YoY growth in 2025 (midpoint of guidance) that gradually tapers to 12% by 2034.
“Cash Flow” Margin: 20.5%, correlating to a 30% Adjusted EBITDA margin, minus CapEx and income taxes.
Perpetual Growth Rate: 2.5%.
Discount Rate: 10%.
This target implies an upside of around 29% over the next 12 months. Yet given SoFi’s track record of exceeding targets, my bull case of $25 by the end of 2025 remains very much in play if the company sustains its current level of execution.
Institutional investment is also on the rise. As fundamentals keep improving, it’s likely more large investors will initiate or expand positions, pushing the stock higher.
Risks
Declining Margins
Management expects a small drop in margins in the short run due to investment spending. If margin contraction persists beyond Q2 or Q3, the stock might face near-term headwinds.Growth Slowdown
The Lending segment has gained momentum, but the Tech Platform’s growth can be lumpy.
Financial Services faces tougher year-over-year comparisons in 2025.
A failure to meet the higher end of growth guidance could pressure valuations.
Thesis
SoFi enjoyed an outstanding 2024, surging to new 52-week highs. The climb was justified by the stock’s prior undervaluation, SoFi’s stellar performance, and the ongoing expansion of its ecosystem.
However, the rally paused abruptly when the company issued mixed guidance for 2025, with a softer-than-expected EPS outlook overshadowing its strong revenue forecast. In my view, this is shortsighted. Sacrificing short-term profits to drive decades of sustained growth should be encouraged, not penalized—especially now that SoFi is already profitable and has ample balance sheet strength.
Moreover, investors should remember that SoFi’s management consistently underpromises and overdelivers, and analysts frequently underestimate its performance. This year appears to be no different, with analysts now lowering their forecasts to near the lower bound of SoFi’s guidance.
I maintain my bullish stance. SoFi is well-positioned to exceed both internal and external targets, potentially sparking another rally. If the company continues to execute at its current pace, $25 in 2025 seems fully attainable.