Is SoFi Stock a Buy Now?

SoFi (NASDAQ: SOFI) has taken investors on a bit of a roller coaster ride over the past year. After soaring rapidly in the latter half of 2024, the stock fell sharply after mildly disappointing profitability guidance in January.

However, SoFi just reported its first quarter results, and to say that the numbers look good would be an understatement. Here's a rundown of how the company is doing, and whether it's worth a closer look right now.

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A record-breaking quarter for SoFi

SoFi not only set a new quarterly record for revenue, but with 33% year-over-year growth, the company's already impressive growth rate is accelerating. This was fueled by adding more than 800,000 new members to the company's ecosystem, also the highest ever, as well as record-high loan originations of $7.2 billion.

Speaking of lending originations, this was a surprisingly strong point, and not just when it comes to personal loans, which grew by 21% year-over-year in terms of volume. As student loan repayment resumed and forgiveness efforts effectively ended, SoFi's student loan volume, including refinancing loans, increased by 58% year over year. And although home loans are a relatively small part of SoFi's lending operations for now, that might not be the case for long, as home loan volume increased 54% despite the persistently high-interest environment.

Not only is SoFi's revenue growing fast, but the company is also rapidly becoming more profitable. After posting its first full year of profitability in 2024, SoFi reported its highest quarterly earnings yet.

Product adoption is strong, with the number of products growing at a faster rate than the number of members for the first time since 2022. Cross-selling financial services and lending products to its existing members is one of SoFi's biggest growth opportunities, and it appears to be doing a good job this year.

Fee-based revenue growth is impressive

One of the biggest takeaways from SoFi's first quarter results is just how strong its fee-based revenue growth has been. Essentially, this is anything that isn't net interest income, and SoFi has done an excellent job of building this, especially through its third-party loan origination platform. Capital-light revenue sources like loan referral fees are a great way to scale and increase margin.

In the first quarter, SoFi's fee-based revenue grew by 67% and now makes up 41% of the company's total, up from 27% just two years ago. That's a big reason adjusted EBITDA margin has grown by 600 basis points since then.

Looking ahead

To put it mildly, there aren't many companies raising their guidance right now, because of the economic uncertainty that escalated rapidly over the past month or so. However, SoFi is a big exception.

SoFi significantly raised its guidance for revenue, adjusted EBITDA, EPS, and tangible book value growth. It now expects adjusted EBITDA margin to increase by a full percentage point versus 2024, while the previous guidance called for no margin expansion.

Not a cheap bank stock

Although SoFi is still down by about 25% from its January peak, it isn't a cheap stock. It trades for about 2.9 times tangible book value and for about 50 times full-year earnings guidance. Just for context, Bank of America (NYSE: BAC) trades for less than 1.5 times tangible book and for roughly 11 times forward earnings.

On the other hand, Bank of America, which is one of my largest stock positions, isn't growing revenue at a 33% rate, isn't rapidly building out fee-based revenue sources from scratch and isn't growing its deposit base by 9% sequentially.

In short, SoFi deserves a premium valuation. If the fintech company can keep its momentum going and can continue to rapidly improve profitability at the same time, the current valuation could end up looking cheap. To be sure, there's a lot of execution risk when it comes to taking SoFi to the next level, but there's a lot to like about the risk-reward dynamics here.

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Bank of America is an advertising partner of Motley Fool Money. Matt Frankel has positions in Bank of America and SoFi Technologies. The Motley Fool has positions in and recommends Bank of America. The Motley Fool has a disclosure policy.