The company’s core offering is private student loan refinancing, and that business has taken off sharply. However, the company has built out an ecosystem of other lending products, which are seeing strong growth as well.

As consumers look for a way to avoid missing payments, potential interest in refinancing activity could spike. Despite a dip from the $25 peak, SoFi’s progress, profitability, and growing membership signal an opportune time to buy, with shares still trading hands well below $10 per share.

Earnings Were Amazing

For years, SoFi showcased positive adjusted EBITDA. In early 2023, the online consumer bank’s shift toward GAAP profitability caught investors’ attention. Indeed, SoFi surprised many investors with its $48 million GAAP net income in its recent report, exceeding Wall Street’s expectations.

In 2024, the fintech company expects contracting U.S GDP through unemployment rates and interest rate cuts. This will likely bring the federal funds rate to 4.5% by the end of 2024. Given a pervasive less-than-optimistic economic outlook from many investors, SoFi may indeed be a risky stock to buy at current levels. However, improving fundamentals could shift the story away from the macro toward the company’s fundamental improvement over time. That’s a narrative many long-term investors may be banking on with shares trading in this range. This outlook is also central to this SOFI stock forecast.

Due to a swiftly expanding customer base, SoFi anticipates accelerating earnings growth in the years to come. Projections for 2026 indicate GAAP earnings could range from 55 cents to 80 cents per share. Beyond 2026, management foresees a sustained annual earnings growth of 20% to 25%. That’s good enough for me, and many fintech investors will be hard-pressed to find that kind of growth elsewhere.

Improvements Are Evident

SoFi’s confidence in its sustained growth appears to be rooted in a focus shift toward profitability. The company has increasingly focused on net interest margins, which have been improving.

In the company’s fourth quarter, SoFi’s financial services segment saw its net profit surge to $25 million. This was due to a 44% increase in membership (to 7.5 million members) at the end of last year, many of whom added on other financial services within their accounts. With expectations for 75% financial services revenue growth this year, SoFi is a stock that’s growing in a broadly diversified fashion. That’s something I like to see.

Additionally, it’s worth pointing out that SoFi acquired Galileo in 2020, further expanding in 2022 with its acquisition of Technisys. These deals create a versatile tech platform serving a clientele that may be looking for traditional banking services but on a fintech platform. The company’s Q4 tech platform revenue rose 13% year-over-year to $97 million, with financial services and technology contributing 38% of total 2023 revenue. Anticipating further growth, SoFi expects these segments to contribute roughly half of total revenue in 2024.

Personal Loans Segment Will Flourish

While SoFi has been synonymous with student loan refinancing, personal loans dominated lending since early 2021, constituting 67% of loan originations and balance sheet holdings as of Dec. 31. Despite their lucrative 13.8% average coupon, the unsecured nature of these loans poses a higher default risk. Economic downturns could lead to payment disruptions, impacting SoFi even with better credit-quality borrowers.

That said, this business should be broadly profitable over the long term, with higher average interest rates compensating for the higher risk of this portfolio. The company’s core business remains strong, with CEO Anthony Noto noting 95% year-over-year growth in student loan originations. Thus, so long as the company’s overall business trends in the right direction, SOFI stock is one that could build momentum from here.

SOFI Stock Appears to Be Worth a Nibble

Plenty of headwinds could materialize that could neutralize the above thesis. Any sort of major financial meltdown or a slowing of the economy more broadly would impact SoFi and its ability to generate loan growth. That said, I do think the company is well-positioned on a relative basis compared to its peers, with greater financial strain likely to lead to higher demand for refinancing activity in certain pockets of the market.

For now, I view the risk-reward around SOFI stock as favorable. At around $7.50 per share, this is a stock I think investors can do well nibbling on, and adding to over time, assuming the company’s financials continue to trend in the right direction. This concludes my SOFI stock forecast.