Analyzing Upside Potential For SoFi Technologies Stock

SoFi Technologies (NASDAQ: SOFI) has been making headlines lately, and for good reason. The stock has surged 16% in just one week, hitting a fresh 52-week high of $18. But what’s driving this momentum, and is there more room to run?

The recent rally stems from SoFi’s announcement that cryptocurrency investments will be making a comeback on their platform later this year. This isn’t just about offering crypto trading – the company plans to leverage blockchain technology for rapid international money transfers, positioning itself at the intersection of traditional finance and digital assets. The market’s reaction has been overwhelmingly positive, and it’s easy to see why. Crypto services could become a significant revenue driver, especially as digital assets continue gaining mainstream acceptance. That said, if you want upside with a smoother ride than an individual stock, consider the High Quality portfolio, which has outperformed the S&P, and clocked >91% returns since inception. Separately, see – What’s Behind The 100% Jump In Wolfspeed Stock?

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Strong Revenue Growth Story

SoFi’s financial performance has been impressive, particularly when compared to broader market benchmarks:

• Three-Year Performance: Average revenue growth of 36.2% annually (vs. 5.5% for the S&P 500)
• Last 12 months: Revenue jumped 25.9% from $2.2 billion to $2.8 billion
• Most recent quarter: 31.7% growth to $772 million from $586 million year-over-year

These numbers tell a compelling growth story that significantly outpaces the broader market.

The Big Picture: Looking Ahead to 2027

Here’s where things get interesting from an investment perspective. We expect SoFi’s revenues to grow at roughly 21% annually, reaching over $5 billion by 2027 – essentially doubling from the projected $2.6 billion in 2024.

But here’s the kicker: these projections don’t even factor in the potential boost from the new crypto offerings. To put this in perspective, Robinhood generated $626 million in crypto trading revenue in 2024 with around 24 million users. With SoFi’s 8.5 million members and typically higher net worth customer base, capturing even a fraction of Robinhood’s per-user crypto revenue could add $150-300 million annually to SoFi’s top line within a few years. This suggests the actual growth could significantly exceed current expectations.

Valuation Analysis: The 80% Upside Case

Currently trading at $18, SoFi has a price-to-sales ratio of 7.3x based on trailing twelve-month revenue. This is slightly above its four-year average of 5.5x, reflecting increased optimism around crypto offerings and potential interest rate improvements.

Let’s walk through the math on the upside scenario:

Now, if SoFi’s Revenues grow 2.5x over the next three years (better than the projected 2x), the P/S multiple will shrink to 3.1x from its current level, assuming the stock price stays the same, correct? But that’s what SOFI’s investors are betting will not happen! If Revenues expand 2.5x over the next few years, instead of the P/S shrinking from around 7.3x presently to about 3.1x, a scenario where the P/S metric falls more modestly, perhaps to about 5.5x, looks more likely (within the typical fintech range of 4x-7x and SOFI stock’s own historical average).

At 5.5x the price-to-sales, SoFi’s stock price would reach around $33, reflecting an 80% gain from current levels. The logic is straightforward: as revenues expand dramatically, even if the valuation multiple compresses slightly, the absolute stock price should rise significantly.

The Reality Check: Risks to Consider

Before getting too excited about the upside potential, let’s address the elephant in the room – the risks.

• Interest Rate Sensitivity: As a bank, SoFi’s profitability is closely tied to interest rate movements. If rates don’t decline as hoped, margins could face pressure.
• Intense Competition: The fintech space is crowded with both traditional banks and innovative startups fighting for market share. SoFi needs to continuously innovate to maintain its edge.
• Valuation Multiple Risk: Some investors might argue that SoFi should trade more like a traditional bank (2x-3x revenue) rather than a high-growth fintech company, which could limit multiple expansion.
• Market Volatility Concerns: SoFi has historically been more volatile than the broader market during downturns:
  • 2022 inflation shock: SOFI fell 83.3% vs. S&P 500’s 25.4% decline
  • 2021 COVID-19 correction: SOFI dropped 46.7% vs. S&P 500’s 33.9% fall

This volatility pattern suggests the stock could face significant headwinds during market stress periods.

The Bottom Line

SoFi presents an intriguing investment opportunity with legitimate 80% upside potential, driven by strong revenue growth and the upcoming crypto platform launch. The company’s track record of outpacing market growth rates is impressive, and the crypto integration could accelerate this trend. However, investors should approach with eyes wide open about the risks. Interest rate sensitivity, competitive pressures, and the stock’s history of amplified volatility during market downturns are real concerns that could impact returns. Now, we apply a risk assessment framework while constructing the Trefis High Quality (HQ) Portfolio which, with a collection of 30 stocks, has a track record of comfortably outperforming the S&P 500 over the last 4-year period. Why is that? As a group, HQ Portfolio stocks provided better returns with less risk versus the benchmark index; less of a roller-coaster ride, as evident in HQ Portfolio performance metrics.

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