1/ $SoFi Technologies Inc.(SOFI)$ train is taking off.
Revenues are exploding, margins are expanding, and now crypto is also coming back to SOFI.
Stock is up 33% last month and it's just the beginning...
Here is my SOFI investment thesis: 🧵
2/SOFI is rapidly turning into a one-stop shop for all financial services.
They offer a full suite of banking & investment products through a fully mobile experience.
This one-stop shop offers incredible value to members.
Active members quadrupled since June 2021:
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3/ Result? Revenues grew from $253 million in 2021 to $1.2 billion in 2024.
What's more important is that 41% of the revenue came from fee-based sources such as Galileo, Loan Platform, Sofi Invest, etc..
It's just beginning. SOFi will see accelerating growth and expanding multiples going forward.
Let me explain:
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4/ SOFI was primarily a lending business.
Its quarterly origination volume doubled from 2019 to 2024, growing 15% YoY.
When the Fed started raising rates, it doubled down on its fintech business to compensate for the slowdown in lending.
It worked incredibly.
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4/ Its financial services revenue grew 54% last year while lending grew only 18%.
Staggering 53% of all revenue comes from financial services and tech platforms now.
This alone rebuts the argument that SOFI is just a bank.
No, it's a giant fintech that owns a bank.
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5/ This shift to fee-based revenue will accelerate.
Last year, it created a loan platform business (LPB) to drive fee-based growth.
In LPB, SOFI originates the loan to qualified borrowers in its user base on behalf of third parties in exchange for fees.
Zero risk business.
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6/ Loan Platform Business scaled incredibly fast. After launch in Q3 2024, it added $100 million fee-based incremental revenue. This is just the beginning.
SOFI signed a $5 billion deal with Blue Owl Financials in April in addition to the $2 billion they signed with Fortress Capital in Q4 2024.
LBP will generate $200-$250 million fee-based revenue only from these deals.
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7/ Lending is also set to accelerate alongside fee-based businesses. After the Fed cut rates last September, its loan originations grew by 66% while the segment revenue grew by 27%.
As the Fed is set to cut rates once again in its September meeting, lending can accelerate even further.
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8/ Crypto is also coming back to SOFI. Crypto is how modern brokerages like $HOOD grew so fast. It's a cash-cow. For reference, $Robinhood(HOOD)$ generated over $330 million in crypto revenue last quarter, and it was 30% of their total revenue. They have already recruited some test users for crypto transactions.
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9/ Global payments are coming too. SOFI will use Bitcoin to convert the USD to international currencies. This is a giant market that is completely fee-based.
10/ It's still attractive.
Management expected 26% annual revenue growth by 2026 and 20% annual growth beyond that until 2030.
This was excluding crypto.
Now that crypto is coming back and Level-1 Options and global money remittance are about to be launched too, I think it can grow 25% annually until 2030.
This gives us $8.2 billion in revenue in 2030.
Leading digital banks like $Nu Holdings Ltd.(NU)$ have above 20% net margin. Even if we assume $SOFI net margin will be just 20%, it'll generate $1.6 billion net income.
At 25 times exit multiple, we will get a $24 billion company. It's valued at $20 billion today.
Given the quality of the company and serious growth potential beyond the forecast period, I think it's a favorable proposition.
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