Does SoFi Have the Potential to Foster Millionaires?
Gaze at the share chart of SoFi Technologies (SOFI dropping 1.38%), you'd be unsure if you're viewing the price fluctuations of a genuine venture or a sketch of a roller coaster ride. The company has led shareholders on a thrilling ride in the last few years.
As of now, SoFi is trading half the price of its peak, yet it's seen remarkable growth in recent times, soaring 70% since October's start (as of Nov. 8).
Can this surging fintech company turn you into a millionaire?
Delivering Phenomenal Growth
The financial sector, renowned for its age, isn't typically welcoming to its consumer base. It's criticized for imposing unnecessary fees, creating obstacles in money transfer, and lagging in technology. By acknowledging this predicament, and simultaneously exploiting the rise of smartphones and the internet, SoFi has constructed a prosperous digital banking empire so far.
Offering a plethora of financial services and loan products, without brick-and-mortar branches, SoFi is able to serve customers swiftly due to reduced overheads.
Stagnant growth characterizes the industry, as it's an established market. However, as a disruptor, SoFi has bucked this trend by recording impressive gains. In 2023, sales surged 35%, subsequently increasing 29% over the first nine months of 2024. As of Sept. 30, the company had 9.4 million customers, a 524% increase from only four years prior.
"Catering to an individual's entire financial needs in a single platform with high-quality products delivered seamlessly digitally provides us with a substantial edge," CEO Anthony Noto mentioned during the third-quarter 2024 earnings call. "This is why you'll frequently hear me say it's only a matter of time before we rank among the top 10 financial institutions."
Approaching Profitability
Critics often point out that SoFi, like any rapid-growth enterprise, has fallen short of profitability in its past. However, this trend seems to be changing. SoFi has reported four consecutive quarters of positive profit. In the recent three-month period, SoFi generated a diluted EPS of $0.05 - a significant turnaround from the $0.29 loss recorded in Q3 2023.
The leadership team anticipates the good times to persist, forecasting SoFi to post an EPS of $0.11 to $0.12 for the full year. By 2026, this figure is predicted to surge to $0.68 (at the midpoint), subsequently climbing between 20% and 25% annually thereafter as a fully digital bank, SoFi operates a scalable business model.
Due to escalating earnings, the current forward P/E ratio of 105 appears less exorbitant. Investors must trust SoFi's bottom line will keep expanding before investing.
Achieving Millionaire Status
It's challenging to predict whether a stock can transform into a millionaire-maker. But as previously mentioned, SoFi possesses the attributes to potentially accomplish this.
However, one significant risk factor that investors need to consider is the intense competition within the industry. I mentioned earlier that SoFi has carved a successful niche in the enormous financial services market. However, larger banks have not been passive, investing heavily in their digital capabilities to improve customer service. This implies that SoFi must continue to perform at its best.
Regardless, SoFi has the potential to generate substantial investment returns if it maintains its path of rapid revenue, member, and EPS growth. If you have the financial capacity to invest more upfront and also possess a longer-term perspective, then the likelihood the stock could make you a millionaire increases.
In light of SoFi's impressive financial growth and recent profitability, investing in this fintech company could potentially yield substantial returns, possibly even leading to millionaire status. The company's digital-first business model, efficient operations, and focus on catering to customers' entire financial needs set it apart in the market and position it as a potential disrupter in the financial sector.
