SoFi Technologies (NASDAQ:SOFI) just delivered what CEO Anthony Noto called "a tremendous start in 2025" with its Q1 earnings report released on April 29. The fintech disruptor has been on a rollercoaster ride in the past year, with shares fluctuating between $10 and $18 before bottoming out around $10.
SOFI stock is over $13 as of writing, and many are wondering whether or not the rally has legs after gaining 14% in just the past month. Let’s take a look.
If you're looking for evidence that SoFi's "Financial Services Productivity Loop" strategy is working, the Q1 results deliver it in spades. The company reported that its Financial Services segment doubled revenue year-over-year to $303 million. The non-lending business has solid momentum and posted $148 million in contribution profit all on its own with a 49% margin.
Fee-based revenue grew 67% to $315 million and now constitutes 41% of total adjusted net revenue. The capital-light revenue streams could make SOFI stock trade at a higher premium over time since it will reduce the company’s reliance on interest rate spreads and credit cycles.
SoFi also added a record 800,000 new members in Q1 and brought its total to 10.9 million. 32% of new products were opened by existing members, so the cross-selling strategy seems to be working.
The stock market may have cooled off significantly, but nowhere near enough to make most software stocks trade at “cheap” levels. Many fast-growing SaaS companies are still changing hands at triple-digit earnings premiums, and you’d expect SOFI stock to trade at 50-60 times earnings with the revenue growth and the solid margins. However, it trades cheap-ish at 30.6 times earnings.
The consensus price target of $13.1 implies 1.7% downside from here, but these price targets are likely to be raised over time due to the solid earnings report. The highest price target is at $20.
Given SoFi's strong Q1 performance and raised guidance for 2025, I believe the company remains an attractive investment for long-term growth investors. Full-year guidance has been raised for revenue to $3.235-$3.310 billion, and adjusted EPS is expected to come in at $0.27-$0.28.
Analysts see EPS at $0.25 for the full year and revenue at $3.19 billion. Even the lower end of the guidance easily beats these expectations.
If you look at historical revenue and EPS expectations, SoFi has a history of significantly outperforming estimates. Another beat in Q2 could send the stock soaring.
That said, the stock needs the broader market to cooperate for a sustained rally. This is a financial services company and could be hit hard by any downturn. Since we’re close to the Q1 GDP report, I’d wait for it to come out before buying.
