SoFi Earnings: Strong Bottom-Line Results on Net Interest Income and Loan Platform Growth

Key Morningstar Metrics for SoFi Technologies

• Fair Value Estimate: $14.00
• Morningstar Rating: ★★
• Morningstar Economic Moat Rating: None
• Morningstar Uncertainty Rating: Very High

What We Thought of SoFi Technologies’ Earnings

SoFi Technologies SOFI maintained its strong momentum in the fourth quarter. Net revenue increased 19% from a year ago to $734.1 million, with the loan platform business a major contributor. The firm controlled costs well, which led to a 148% increase in net income to $61 million as it gained scale.

Why it matters: SoFi’s results were impressive overall, with solid growth from multiple business lines and sources. However, the shares were sharply lower in Jan. 27 trading, which we believe can be traced to their stretched valuation and the firm’s unexciting guidance for 2025.

• SoFi expects first-quarter revenue to be effectively flat sequentially, with net income of $30 million-$40 million. Management has a history of being conservative with its quarterly guidance, but this does throw cold water on the market’s heightened expectations
• The issue is likely SoFi’s loan platform business, which delivered strong growth in the fourth quarter. But this was tied to a $2 billion deal signed with Fortress Investment Group, which has run its course. Unless this is replaced or expanded, SoFi’s short-term growth will face headwinds.

The bottom line: We are maintaining our fair value estimate of $14 per share for SoFi. Even with the shares trading lower, we view them as modestly overvalued after their meteoric performance over the last six months. We think the market is implying too much growth.

• While SoFi saw strong fee-based revenue, net interest income remains its largest driver. NII increased 20.7% to $470 million and was responsible for roughly two-thirds of the top-line growth.
• There are concerns that this growth could be capped by SoFi’s ability to expand its balance sheet while complying with capital reserve requirements. However, SoFi saw impressive equity value growth in 2024, and its reserve ratios are well above the required levels, offsetting these concerns.