30-04-2025
SoFi Stock Up 22% As It Beats And Raises On Growth Flywheel
SUN VALLEY, ID - JULY 08: Anthony Noto, chief financial officer of Twitter, attends the Allen & ... More Company Sun Valley Conference on July 8, 2015 in Sun Valley, Idaho. Many of the world's wealthiest and most powerful business people from media, finance, and technology attend the annual week-long conference which is in its 33rd year. (Photo by)
Shares of SoFi Technologies have risen 22% since Monday after reporting expectations-beating first quarter results and raising full-year guidance. (Disclosure: I am a SoFi shareholder).
Despite that good news, SoFi stock trades roughly 43% below its June 2021 peak of $23.
Can SoFi stock reach new all-time highs? The answer depends on whether the company creates new sources of growth to power a string of future beat-and-raise quarters – in which the company exceeds quarterly performance targets and offers guidance above what analysts expecting.
To do that, SoFi must be among the small number of public companies that continues to provide upbeat forecasts – as tariff uncertainty impels many public companies to stop offering guidance.
Moreover, government policy could hinder and help SoFi's growth. Tariffs could drive many employers to part ways with employees – which could make the job market more difficult and increase SoFi's loan charge-offs.
On the other hand, SoFi could benefit from looser cryptocurrency regulation which could create a new source of revenue growth. And pending legislation aimed at lessening government involvement with student loans could affect demand for SoFi student loans.
Ultimately, SoFi will continue to benefit from a growth flywheel – the Financial Services Productivity Loop – in which customer lifetime value rises as the company's product innovation and brand building add new products, according to StockTitan.
SoFi exceeded investor expectations for the first quarter of 2025 and raised full year guidance.
The company delivered our highest revenue growth rate in five quarters, driven by new records in members, products, and fee-based revenue," SoFi CEO Anthony Noto said in a statement. "We are off to a tremendous start in 2025," he added.
Here are the key numbers:
Since early 2018 when he became CEO, Noto said he wanted to build a 'mission-driven company,' he told Barron's. 'From day one over seven years ago, it has always been our mission to become a one-stop shop,' he added.
Aiming to make SoFi one of the top 10 financial institutions in the U.S. based on market capitalization, SoFi wants to help customers 'borrow better, save better, spend better, invest better, and protect better,' Noto concluded.
SoFi appears to be relatively immune for now to the public company guidance conundrum – which is forcing CEOs to choose between the desire to raise guidance to benefit their stock prices and the tariff uncertainty making realistic forecasts impossible.
Business leaders are feeling anxious about the Trump administration's shifting tariff policy and other regulatory changes, according to poll conducted last week by business group Leadership Now Project and the Harris Poll, featured in a Wall Street Journal report. After surveying 'more than 300 senior corporate executives,' 84% reported
In a survey of more than 300 senior corporate executives released April 29, 84% reported feeling 'somewhat concerned or very concerned about how the current political and legal climate will affect their businesses,' noted the Journal.
This concern has led some public companies to pull their guidance. General Motors, JetBlue, Snap and Volvo are among the companies withdrawing their guidance because 'the trade war's unknowable course and consequences make it futile to forecast future performance,' reported the Journal.
Meanwhile, Porsche's new guidance excludes any tariff impact beyond May. "If the current tariffs remain in place, Porsche would need to raise prices and adjust its guidance again, the company said, according to the Journal.
Tariffs are creating a new set of winners and losers. SoFi joins the list of winners – which include Netflix and ServiceNow, as I wrote in an April 25 Forbes post.
New government polices could have a mixed impact on SoFi's future.
The good news is loosening policies towards banks operating in the cryptocurrency business represent an opportunity for SoFi – enabling the fintech firm 'to offer crypto investing by year-end, barring unforeseen circumstances,' Noto told CNBC.
It is unclear how new legislation aiming to tighten student loans would affect SoFi's business. The tighter lending terms in the bill could reduce demand for student loan refinancing. The bill could also increase loan charge offs in the short-term while improving longer-term credit quality, noted SoFi's Q1 2025 earnings call transcript.
Finally, Trump's tariffs could hurt SoFi's growth. If tariffs remain at current levels, trade tensions could hurt growth and push inflation higher, motivating Morgan Stanley analyst Jeffrey Adelson to issue a sell rating on the stock and setting a price target of $6 – implying significant downside, according to The Globe And Mail.
In 2021, one analyst envisioned SoFi would grow rapidly by 2025 and forge a path to profitability. Mizuho analyst, Dan Dolev wrote that he saw SoFi enjoying 40% average annual revenue growth between 2021 and 2025 and becoming profitable in 2024, according to my September 2021 Forbes post.
Dolev was pretty close in his estimate. Between 2021 and 2024, SoFi's revenues grew at a 39% average annual rate from $977 million to $2,640 million. In 2024, SoFi earned $479 million in net income – after a loss in 2023, according to a company release.
To reach profitability, SoFi needed to lower its costs as it grew. To that end, SoFi would need to investment in a platform to support new services and then encourage its customers to buy more of them, I wrote.
In so doing, SoFi might 'spread its costs over more products — achieving economies of scope — and through excellent customer service has the potential to add many new customers — thus spreading its costs over more customers,' according to my post.
Dolev envisioned this working as SoFi encouraged 'user engagement, nurturing a flywheel effect of more users taking advantage of SoFi's multiple services driving additional growth.' He expected this flywheel to create 'operating leverage' as revenues grow — ultimately 'shrinking losses profits,' according to Nasdaq.
Will Morgan Stanley's bearish view prevail or will Noto's optimism enable the company's stock to rise?
Here are three bullish analyst views:
Yet with first quarter gross domestic product contracting 0.3%, according to CNBC, the concerns raised by Morgan Stanley could cap SoFi's upside.
Disclosure: I own shares in SoFi Technologies – starting as an angel investor in 2014.
