1 Stock to Buy Hand Over Fist as ‘Risk On' Sentiment Gains Momentum
There has been a 'risk on' rally in U.S. markets over the last few trading sessions driven by multiple triggers. Recent corporate earnings have demonstrated resilience and were not as bad as markets feared. The uncertainty over tariffs has somewhat subsided, and the U.S. signed its first trade deal with the U.K.
The U.S. and China are also set to begin trade negotiations over the weekend in Geneva. Reaching a U.S.-China trade deal might take a long time, but the two sides have now shown intent to work toward one. Also supporting the market is President Donald Trump's call to 'buy stocks.'
We now have a 'risk on' trade in markets that looks set to continue. Given the current macroeconomic environment, I find SoFi (SOFI) stock quite attractive, as we'll discuss in this article.
4 Reasons SoFi Stock Looks a Good Buy
SoFi is among the quality growth stories, and the company has now been profitable for six consecutive quarters. Here are the key reasons SoFi looks like a good buy.
Strong Membership Growth and Cross-Selling Opportunities: SoFi's revenues rose 33% in Q1 2025, which was the highest growth rate in five quarters. After the strong Q1 performance, it raised its 2025 revenue growth guidance to 24%-27% while also raising the profit forecast. SoFi's member count continues to swell, and it added a record 800,000 members in Q1, ending the quarter with 10.9 million members. SoFi needs these members to be able to cross-sell them more products, enabling its continued growth.
Product Innovation: SoFi continues to add more products to its portfolio as it aspires to become a one-stop financial shop for its customers. It is also reentering the crypto market and will allow crypto investments on its platform, thanks to the relaxed regulations under the Trump administration. The company continues to work on product innovation, and during Q1 2025, it launched a rewards debit program with Wyndham Hotels & Resorts (WH). It expects to launch similar debit cards with other hospitality and travel companies.
Growing Deposit Franchise: SoFi's deposit franchise is growing at a brisk pace, which helps the company lower its reliance on outside funding. By default, the rates that SoFi pays on wholesale borrowing are higher than the APYs that it pays on customer deposits. Over the long term, SoFi is targeting 85%-90% of its funding from depositor funds, which would help it improve its margins.
Pivot to Asset-Light Business Model: SoFi is pivoting to a more fee-based and capital-light business model. As part of the strategy, the company has been originating loans for third parties under what it calls the loan platform business (LPB). SoFi provided some context on total addressable markets for such loans, and during the Q1 2025 earnings call, it said that while the company underwrites around $20 billion worth of loan originations annually, it rejects a mammoth $100 billion. By routing these customers to third parties, SoFi can serve customers it would not have otherwise lent to. In the process, it not only keeps the risk-free, fee-based income, but also has the opportunity to cross-sell other products to these customers over time.
SoFi Stock Forecast
However, Wall Street analysts are not particularly bullish on SOFI. Of the 19 analysts covering the stock, only six rate it as a 'Strong Buy' while one rates it as a 'Moderate Buy.' Eight analysts rate SoFi as a 'Hold,' while the remaining four rate it as a 'Sell' or lower.
While SoFi has been growing at a stellar pace, its valuations have been a breaking point for a section of the market. The stock trades at a price-book value of 2.18x, which some believe is on the higher side, arguing that the multiple should be closer to 1x, which is seen as a fair valuation for banks.
I, however, don't agree with that argument. First, SoFi is not like a traditional bank (even though it owns a bank charter) as it gets a high share of its revenue from non-lending-based ventures. Second, SoFi is growing faster than any of the other leading banks. Furthermore, many banks trade at a significant premium to their book value, and the price-book multiples for JPMorgan Chase (JPM) and Wells Fargo (WFC) are 2.09x and 1.45x, respectively.
SoFi trades at a forward price-earnings (P/E) multiple of 46.18x, which might again look bloated at first glance. However, the company's profits are growing at a stellar pace and are expected to rise by over 80% each in 2025 and 2026. Given the kind of growth SoFi brings to the table, I don't see the multiples as elevated.
Based on SoFi's EPS guidance of between $0.55-$0.80 in 2026, we get a 2026 P/E multiple of 16.6x at the top end, which does not look exorbitant. The company is optimistic about delivering annual EPS growth of 20%-25% beyond 2026, which again looks quite reassuring. Those who have followed SoFi for a long time would agree with me that the company is quite conservative with its guidance and has mostly exceeded its forecast for the last few years.
Overall, with the risk-on trade gaining traction, I would double down on SoFi. I see see the stock soaring to new highs over the next couple of years.
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