SoFi Technologies Inc (NASDAQ: SOFI) touched a high of $14.42 this morning – a level that was last seen in early 2022.
The financial services company has rallied over 30% since election day amidst expectations that it will benefit from a more accommodative regulatory backdrop under the new government.
Part of the recent upside in SoFi stock may have been related to peer Upstart that talked of improving credit trends on its earnings call last week – a comment that bodes well for personal lending at large.
Despite the massive rally, however, there’s reason to believe that SOFI is not out of juice just yet.
What could drive SoFi stock?
SoFi stock remains attractive as CEO Anthony Noto expects it to eventually be one of the biggest US banks. “It’s a matter of when, not if,” he told investors in the earnings release last month.
The fintech firm has increased its revenue by more than 20% over the past 17 quarters straight despite higher interest rates that weighed on its lending business.
And the momentum will likely get stronger only now that the Federal Reserve has started cutting rates and Donald Trump is slated to take office in the coming months.
The US central bank lowered its key interest rate by another 25 basis points on November 7th.
SoFi looks particularly well-positioned as it’s seeing rapid growth in members and products.
The personal finance company saw a 35% increase in members and a 31% increase in products in its third quarter.
Still, SOFI shares are unattractive for income investors as they do not currently pay a dividend.
Are SoFi shares overvalued at current levels?
About 20% of Americans are currently looking for a new credit card and a new savings account, as per recent data from Mintel.
That could translate to more business for SoFi Technologies in 2025.
SOFI also offers checking accounts and investing solutions – so it’s fair to say that it has successfully transformed from a student loan expert to a full-grown financial services company.
Such diversity in its business model could help boost its stock price as well.
Note that SoFi stock is currently trading at a one-year forward price-to-earnings multiple of close to 61.
While that isn’t cheap by any stretch of the imagination – it isn’t too unreasonable either for a company that grew its revenue by 30% on a year-over-year basis in its latest reported quarter.
Wall Street expects SoFi Technologies to earn 12 cents a share this year and more than double that number to 28 cents per share in 2025.
With expectations of such significant earnings growth over the next year, shares of this fintech firm shouldn’t look all that expensive at current levels.
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