SoFi Stock: A Compelling Buy Before Jan. 27

As we approach the end of January, investors are eagerly awaiting SoFi Technologies' (SOFI) fourth-quarter earnings report, scheduled for Jan. 27. With the stock having surged by nearly 55% in 2024, many are wondering if it's still a buy at current levels. In this article, we'll make a case for why SoFi stock is a compelling buy before the earnings report, based on the company's strong performance, growth prospects, and valuation.



SoFi's impressive run in 2024 can be attributed to several factors:

1. Growing customer base and revenue: SoFi has consistently expanded its customer base and revenue, with total deposits reaching $24.4 billion as of Q3 2023. The company's ability to attract and retain customers, coupled with its high percentage of direct deposit members and strong cross-buy trends, has driven its growth.
2. Diversification into non-lending segments: SoFi has successfully diversified its revenue streams by expanding into financial services and technology platforms. These segments have grown faster than the lending segment and now account for an increasingly large share of the total business. In Q3 2024, revenue from these non-lending segments increased by 64% year over year and rose from 39% to 49% of the total revenue.
3. Banking charter acquisition: SoFi's acquisition of Golden Pacific Bancorp in 2022 provided it with a banking charter, which has significantly enhanced its competitive position and growth prospects. With a banking charter, SoFi can offer customers high yields on deposits, retain more of its loans, and expand its technology infrastructure for non-banking entities.
4. Strong financial performance: SoFi has delivered several consecutive quarters of GAAP profitability, with a net income of $88 million in Q1 2024. The company's adjusted EBITDA margin was 25% in Q1 2024, representing a 91% year-over-year increase. This strong financial performance indicates that SoFi is effectively managing its costs and generating revenue.

Despite these impressive gains, SoFi stock still appears undervalued, with a forward P/E ratio of around 16.3. This valuation is relatively low compared to other fintech stocks and reflects the market's lingering concerns about the company's lending business. However, SoFi's loan portfolio has shown resilience, with a net charge-off (NCO) rate of 3.52% in Q3 2024, indicating that the company is managing its credit risk effectively.

In conclusion, SoFi Technologies' strong performance, growing customer base, and diversified revenue streams make it a compelling buy before Jan. 27. The company's banking charter acquisition and impressive financial results further support the case for investing in SoFi stock. While the stock has surged in 2024, its relatively low forward P/E ratio indicates that there is still room for growth. As SoFi continues to execute on its long-term growth strategy, investors can expect the company to deliver strong results and drive further appreciation in its stock price.