My Top 3 Reasons to Buy the Dip on SoFi Stock in May and Hold for 5 Years

During the three-month period that ended March 31, corresponding to first quarter 2025, SoFi Technologies (NASDAQ: SOFI) reported financial results that were initially very well received by the market. Immediately following the update, shares jumped 7%.

This fintech enterprise is making a name for itself by catering to a younger, digitally native, and affluent customer base. The business stands out thanks to its intense focus on providing a superior user experience.

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As of this writing, the stock trades 52% below its peak. Don't let that discourage you, though. Here are my top three reasons to buy the dip on SoFi stock in May and hold for five years.

Growth isn't a problem

As of March 31, SoFi had 10.9 million customers, or what it calls members. That figure expanded by 800,000 just in the last three months, a record number of additions. And compared to the end of 2019, the customer base is up more than tenfold. In the mature financial services industry, this kind of growth is unbelievable.

Clearly, SoFi is doing something right that's allowing it to rapidly increase its user base. The leadership team aims to constantly innovate and improve its product offerings to better serve customers. Home loans, bolstered by a new home equity product launched in the last 12 months, saw a 54% year-over-year bump in originations in the first quarter. The business is also driving subscriptions to its SoFi Plus premium program.

Adding new members at a brisk pace has propelled revenue gains as well. The company generated a record $771 million of adjusted net revenue in Q1. The Loan Platform segment, which connects borrowers with lending partners, was a standout. It raked in $93 million in fees in the latest quarter, which was up 766% year over year.

Focused on the bottom line

When a company is growing as quickly as SoFi is, investors usually don't care about profits. That's because businesses are forgiven for spending aggressively to develop new products and attract more customers. The goal is to achieve positive earnings at some future date.

This might have been the right way to describe SoFi in the past. However, the company has clearly turned the corner from a financial perspective. Investors should be cheering the news.

By posting GAAP earnings per share (EPS) of $0.06 in Q1, SoFi now has a six-quarter streak going of operating in the black. For the full year, management expects EPS to total $0.27 to $0.28.

There's reason to be optimistic going forward. Wall Street believes EPS will come in at $0.73 in 2027, translating to a phenomenal 165% gain from what is projected for this year.

SoFi doesn't operate with physical bank branches like many financial institutions out there. This allows it to eliminate a major expense. What's more, as the company continues to scale up with more customers and revenue, it should be able to better leverage technology and product development and sales and marketing costs.

Huge upside

Based on SoFi's earnings trajectory, the valuation looks reasonable today. As of this writing, shares trade at 17 times 2027 forecasted EPS. As the bottom line hopefully keeps expanding, patient investors should be rewarded.

CEO Anthony Noto said on the Q3 2024 earnings call that he wants SoFi to be a "top 10 financial institution." Given that this company carries a market cap of $13.4 billion today with an asset base of just $38 billion, there is clearly massive potential based on the leadership team's vision. Of course, nothing is guaranteed. And the industry is incredibly competitive.

However, it's hard to argue with SoFi's latest financial results that point to strong fundamental momentum. Investors have every reason to be optimistic.

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Neil Patel has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.