Banking Rebuilt: Why SoFi’s All-in-One Platform Warrants a Premium

Here is the Initiation of Coverage report on SoFi Technologies (SOFI) with all references and footnotes removed, as requested.

SoFi Technologies (SOFI) — Initiation of Coverage

Rating: Buy | Target Price: $24 | Upside: ~20%

1. Key Data & Forecast Snapshot

• Current Price (8 Jul 2025): $19.95

• 12-Mo Target Price: $24

• Implied Upside: ~20%

• Investment Rating: Buy

2. Investment Thesis

Why Now

• Profitable scale: SoFi reached GAAP profitability in FY2024, with margin expansion and disciplined cost control continuing into FY2025.

• Momentum in user and product growth: SoFi added a record 785,000 members in Q4 2024, driven by cross-selling and platform engagement.

• Catalysts ahead: The resumption of student loan refinancing, product launches (e.g., robo-advisory, Zelle), and new Tech Platform wins position SoFi for accelerated growth.

Positioning Statement

“Fintech universal bank for young professionals, initiate at Buy.” SoFi is evolving from a niche lender into a full-service digital financial platform targeting a large addressable market with a scalable model.

3. Investment Positives

1. Scaled User Growth

• Total members exceeded 10 million in 2024, growing 34% year-over-year.

• Products per member are rising, with 14.7 million total products.

• Management guides for ~28% member growth in 2025, with long-term room to expand ARPU and cross-sell.

2. Revenue Acceleration and Mix Shift

• FY2024 revenue grew 26% to $2.67 billion.

• Fee-based revenue grew 74%, driven by origination fees, platform fees, and banking services.

• Increasing contribution from high-margin segments like financial services and Tech Platform.

3. Attractive Funding Model

• Total deposits reached $26 billion, mostly from direct-deposit customers, lowering funding cost.

• Deposit cost near 4% supports NIM of ~6.1%.

• Loan growth remains strong, backed by stable low-cost funding and disciplined underwriting.

4. Profitability Inflection

• FY2024 GAAP net income: $498.7 million; EPS: $0.39.

• Adjusted EBITDA: $666 million (26% margin).

• Operating leverage visible, with room for incremental margins to improve toward 30% by 2026.

5. Fintech Platform Monetization

• Galileo and Technisys serve over 160 million accounts combined, with YoY growth above 15%.

• Bank-as-a-Service deals with U.S. Treasury and large fintechs validate platform scalability.

• In-house development enables rapid rollout of crypto, investing, and automated advisory products.

4. Competitive/Peer Analysis

• SoFi is the only name among peers with positive net income at scale.

• Affirm and Upstart have higher growth rates but remain unprofitable.

• SoFi's integrated bank-tech model allows cross-subsidization and defensibility.

5. Estimates & Operating Assumptions

Key Drivers:

• Member growth continues above 20% in 2025–2026, driven by onboarding and cross-sell.

• Lending volumes grow in line with deposits and originations in personal and home loans.

• Fee-based products (investing, SoFi Money, Galileo) expand as engagement deepens.

6. Valuation

Primary Valuation: Forward P/E

• FY2026E EPS: $0.53

• Target P/E: 45× ⇒ Price Target: $24

• Current Implied P/E: ~38×

• Implied premium reflects sustained growth, improving profitability, and platform leverage.

Cross-Check: EV/Sales

• FY2026 Revenue: $3.9B

• Target EV/Sales: 7× ⇒ Enterprise Value: ~$27B

• Implies equity value per share: ~$25–$32

• Supports target range based on relative comparisons to Affirm and Upstart.

Sensitivities

• A P/E compression to 35× lowers target by ~$4/share.

• EV/Sales re-rating to 5× implies share price downside to ~$19.

7. Key Risks

1. Credit Deterioration

• A recession or job losses may increase delinquencies and charge-offs, pressuring profitability and capital.

2. Growth Misses Expectations

• Member growth could decelerate if marketing efficiency drops or competition intensifies.

3. Rising Deposit Costs

• Deposit repricing in a sustained high-rate environment could compress margins, particularly in lending.

4. Regulatory Headwinds

• As a bank holding company, SoFi faces tighter oversight. New capital rules or lending restrictions may curb profitability or growth.

5. Execution & Tech Risk

• Platform outages or failed product launches could hurt brand equity and stall growth.

6. Valuation Compression

• At current levels, SoFi trades at a premium. A change in investor sentiment or weaker macro backdrop could lead to multiple contraction.

8. Appendix

Expanded Forecast Model (Summary)

Cohort Growth Overview

• Member Vintage: 2021 cohort shows 1.8–2.2× product expansion by 2024.

• Platform Engagement: >60% of deposit customers use at least two additional SoFi products.

• Tech Platform: Galileo account base grew ~15% YoY, with new enterprise client wins.

As always, Do Your Own Due Diligence and ensure risk management > prediction. Trade smart, stay adaptable, and don’t let emotions chase candles.