SOFI - SoFi Shifts Gears

2024-03-10 06:25:19 ET

Summary

• SoFi's Financial Services segment has reached escape velocity, with revenue growth and operating leverage leading to a jump in profitability.
• The company's lending business still generates the majority of profits, but the Financial Services segment is growing rapidly and contributing to profits.
• SoFi's deposit growth provides a significant funding advantage over other fintech companies and traditional banks.

This is an update of our earlier article on SoFi ( SOFI ) as the fourth quarter delivered more of the same. The company has been doing that for years, with member, product, lending and deposits all growing, although for next year growth is going to shift from lending to Financial Services.

We think the company's Financial Services segment (as well as their Technology segment) has reached escape velocity where revenue growth and operating leverage produced a jump in profitability, with adjusted EBITDA almost doubling sequentially and the margin reaching their long-term target of 30%....

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