I've divested all my holdings in SoFi shares.
SoFi Technologies (SOFI), currently in a downturn with a -0.61% dip, is facing some challenges that have caused its share price to plummet by half over the past three years. Despite a strong start in 2024 with a 25% decrease, the S&P 500 has surged nearly 15%. With a solid reason to sell, I recently parted ways with SoFi, but not because of the decline itself.
Back in the first quarter of 2021, I saw the potential in SoFi due to its innovative "one-stop shop" financial services app, which allowed users to manage their finances easily. I was also drawn to the company's acquisition of Golden Pacific Bancorp, which would potentially bring a national bank charter and reduced loan funding costs. SoFi's ambitious revenue growth projections for 2025, targeting nearly a 6x increase to $3.7 billion, and projected profitability fueled my investment decisions.
However, in recent times, SoFi's growth rates have not lived up to the hype. While revenue has increased significantly, growth has been slower than expected. Worse, revenue growth is actually slowing down. SoFi's 2024 adjusted net revenue is projected to only increase by 15% to 17% year-over-year. Additionally, I'm concerned about the rise in the charge-off ratio for personal loans, which has jumped from 2.97% to 3.45% within a year.
SoFi's innovative nature remains, as it was named one of the world's top fintech companies by CNBC in 2023. The company has also introduced numerous new products and services and successfully completed the acquisition of Golden Pacific Bancorp in February 2022, securing a national bank charter. Stunning member growth and profitability for two consecutive quarters show SoFi's resilience in challenging financial times.
Regardless, these positive developments haven't been enough to quell my concerns. SoFi's cautious guidance for 2025 has dampened investor enthusiasm due to lower-than-expected earnings expectations. Higher interest rates, regulatory uncertainty, and operational challenges have contributed to the slower growth and increase in loan defaults. The expense of ADA compliance and potential new regulations affecting the fintech sector only add to SoFi's ongoing challenges.
Ultimately, the slowdown in revenue growth and rising charge-off ratio for personal loans made me reassess my investment choices. In terms of selling stocks, my two main criteria were either that my original investment thesis was no longer valid or that other opportunities presented themselves with greater potential for achieving my investing goals. Giving both factors a solid check, I decided it was time to move on from SoFi.
Despite my initial enthusiasm for investing in SoFi due to its innovative financial services, significant revenue growth, and promising acquisition, the company's slower-than-expected growth and rising charge-off ratio have encouraged me to reconsider my investment. As I look to allocate my money in finance more effectively, I believe there may be other opportunities with greater potential for meeting my investment goals.
