SoFi (NASDAQ:SOFI) started its life mainly as a student loan platform, but later expanded into a broader range of financial services that now includes everything from investment services to home equity loans.
It has also established itself as a key platform among Millennial and Gen Z users by offering an all-in-one approach to digital financial services to the digitally native generations.
Now, however, shares have skyrocketed by nearly 170% in the last 12 months, bringing SoFi to new all-time highs. Is SoFi stock a good long-term hold, or has the massive rebound in share prices made it too expensive to buy today?
SoFi’s Earnings Popped
SoFi’s Q2 earnings report is an excellent example, detailing year-over-year adjusted net revenue growth of 44 percent to $858 million and a 34 percent increase in membership to 11.7 million. Moreover, Q2 showed the success of SoFi’s pivot toward fee-based revenues, with fees accounting for $378 million of the quarter’s revenue and rising 72 percent compared to the year-ago quarter.
Even more impressive, though, is the massive improvement that SoFi has demonstrated when it comes to profitability. In Q2, net income reached $97.3 million, a gain of 459 percent against Q2 of 2024. On a trailing 12-month basis, SoFi has brought its net margin to 13.5 percent, a number that could keep rising if it can sustain its strong revenue growth rates going forward.
Crucially, the spikes in revenues and earnings weren’t isolated events. SoFi has been able to grow its revenues in each of the last 13 consecutive quarters. While not as long, the earnings growth streak now stands at seven quarters. Considering the challenges SoFi had to bounce back from as it emerged from the COVID-19 pandemic, management’s execution over the past few years has been extremely impressive.
Q2 also served as an excellent example of SoFi’s efforts to build deeper relationships with its existing customer base. 35 percent of the new products opened at SoFi last quarter were opened by members who were already part of the platform.
This not only increases the per-member value at SoFi but also reduces the likelihood of member losses by integrating SoFi more deeply into its members’ financial lives. This is especially crucial for SoFi’s efforts to keep increasing its fee-based revenues, as cross-selling new products creates the opportunity for it to generate more fees from existing members.
While SoFi’s growing ecosystem of financial products and services is faring very well, it’s also worth noting that the core lending platform that originally constituted most of its business is also improving. In Q2, loan originations reached a record of $8.8 billion, driven by strong growth in both personal and student loans. This business could see ongoing growth as the Federal Reserve lowers interest rates, as refinancing activity and new loan origination are both likely to increase when interest rates are lower.
What Do SoFi’s Growth Prospects Look Like?
In addition to deeply positive quarterly results, management also raised its 2025 guidance when it released the Q2 report. Revenue for the year is expected to come in around $3.375 billion, 30 percent higher than what SoFi generated in 2024. GAAP net income is expected to fall in the range of $320 to $330 million. Total member growth is also expected to closely mirror overall revenue growth with a projected increase of 30 percent or 3.0 million new members this year.
Looking a bit farther down the road, analysts project EPS at SoFi to grow at a CAGR of 26.5 percent through the next 3-5 years. This growth will likely be supported by both ongoing membership expansion and increasing income and investment activity by SoFi’s target demographics of young users. With Millennial and then Gen Z workers moving into peak earning years, SoFi could benefit considerably as an ingrained element of young peoples’ financial tools.
Has SoFi Become Overvalued?
One problem investors may have with SoFi right now is the fact that the stock has started to look quite expensive after its strong gains. SOFI now trades at 53.5 times earnings, 7.4 times sales and 19.9 times operating cash flow. While the double-digit rate of earnings growth expected over the next few years could go a long way toward justifying the current P/E multiple, SoFi is clearly priced at a premium that requires strong future performance.
Analyst price estimates also suggest that SOFI shares may have run a bit too far in terms of valuation. The consensus price target of $22.81 implies a downside of about 14.5 percent from the most recent price of $26.54. It’s worth noting, though, that the highest analyst price target is $32, suggesting that there could still be some room left for further returns under the most bullish case.
Is SoFi Still a Good Long-Term Stock to Own?
Although its price may have gotten a bit higher than ideal for investors looking for an attractive entry point, SoFi’s business performance and future prospects are both very appealing. Ongoing growth in its banking, lending and investing businesses could set the stage for progressively higher share prices, especially if the Fed stays the course on its plan to gradually reduce interest rates over the next year.
Ultimately, SoFi could still be a good stock to hold for the long run, even if its valuation doesn’t present the same buying opportunity that investors had access to a year or more ago.
With revenues, earnings, membership and cross-selling of new products all moving rapidly in the right direction, the business itself appears to be well-positioned for long-term growth. SoFi is also in a strong financial position, with only about $3.9 billion worth of debt against assets totaling more than $40 billion.
The author has no position in any of the stocks mentioned. Financhill has a disclosure policy. This post may contain affiliate links or links from our sponsors.