Shares of online bank SoFi Technologies (SOFI -2.41%) soared 55% in 2024, according to data provided by S&P Global Market Intelligence. The company reported positive net income every quarter, grew its platform in multiple ways, and successfully managed through high interest rates.
Leading the way to digital banking
SoFi is an all-digital bank that’s adding members and revenue at a fast rate. Its stock exploded when it first went public a few years ago as part of the craze for special purpose acquisition companies (SPACs) and then tumbled in the bear market that followed. But now it’s proving itself as a bank with staying power, and its stock is following.
Revenue increased 30% year over year in the third quarter, and that was an acceleration. It added 756,000 members in the quarter, a 35% increase over last year, for a total of 9.4 million. Net income was $58 million after a $277 million loss last year, and the 2023 third quarter was the last quarter that it reported a net loss.
SoFi’s roots lie in student lending, and that’s still a core product. The lending segment accounts for most of the business and even more of the profits.
However, that’s changing. Management has been focusing on expanding its platform to cover a broad assortment of financial services like credit cards, investing tools, and bank accounts, and it got a bank charter when it acquired Golden Pacific Bancorp in 2022. It also has a segment called tech platform that provides white-label financial services for business clients.
These non-lending segments are growing faster than the lending segment and increasing as a percentage of SoFi’s total business. Non-lending segments accounted for 49% of total revenue in the third quarter, up from 39% a year ago. The financial services segment increased 102% over last year, and management is guiding for over 80% for the full year.
It’s also guiding for positive and growing net income for the fourth quarter and the full year. And it raised guidance for the lending segment; its adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA); and net income for the full year.
The bank of the future
CEO Anthony Noto has a bold goal of having SoFi become one of the top 10 banks in the U.S., and he says it’s a matter of when, not if. The way things are going, it looks like an attainable goal.
As SoFi keeps up its high growth rates and profitability, its stock should keep rewarding investors in 2025 and beyond.
