Millions of users continue to flock to digital banking platforms for the unmatched convenience and speed of financial services. SoFi Technologies, Inc. (SOFI), a leading fintech disruptor, offers a comprehensive suite of services - loans, banking, and investments - and has successfully filled the gaps where legacy banks lag behind.

Drawing significant interest from investors, SOFI stock surged 75% over the past year, with a blistering triple-digit rally in just three months, hitting a 52-week high of $17.17 on Dec. 17.

But not everyone is convinced the momentum can last. Bank of America analyst Mihir Bhatia downgraded SoFi, cautioning that the stock’s valuation has outpaced its fundamentals. For a company that has delivered impressive growth, such skepticism raises questions. Are investors overlooking warning signs, or is SOFI still a bet worth making?

About SoFi Technologies Stock

San Francisco-based SoFi Technologies, valued at a market cap of $18.3 billion, is reshaping finance across the U.S., Latin America, and Canada. With three core segments - Lending, Technology Platform, and Financial Services - SoFi offers everything from personal and student loans to savings, investing, and insurance.

SoFi powers financial institutions through platforms like Galileo and Technisys, while its mobile-first services, like SoFi Invest and SoFi Money, make investing and money management easy. SoFi’s extensive suite also includes credit cards, travel booking, and employee benefits.

In 2024, SOFI stock has climbed nearly 70%, outperforming the S&P 500 Index ($SPX) by a wide margin. The stock also took off after the Federal Reserve’s 0.5% rate cut in September, relieving pressure on its lending business and sparking a surge in consumer loan demand.

SoFi’s rapid growth and solid profits are undeniable, but its valuations have raised eyebrows. Priced at a hefty 128.44 times forward earnings, SOFI is far from cheap compared to its peers. At 7.17x sales, it also trades above the banking sector’s average. While not bargain territory, SoFi’s fast growth justifies the premium - other banks simply are not matching its pace.

SoFi's Q3 Surpasses Expectations

On Oct. 29, the company unveiled its stronger-than-anticipated third-quarter earnings, with record adjusted net revenue of $689 million, soaring 30% year-over-year. SoFi reported an EPS of $0.05, up from a loss of $0.29 per share in the year-ago quarter.

The financial services segment stole the spotlight, skyrocketing 102% to $238.3 million, now over a third of total revenue. Meanwhile, its tech platform grew by 14%, fueled by clients modernizing their systems. SoFi’s strategic pivot to capital-light, fee-based income is paying off. Fee-based revenue surged 65% to $174 million, supported by record loan platform growth and interchange revenue that doubled in a year. Lending remained a powerhouse, with $6.3 billion in total loan volume, including a stellar $4.9 billion in personal loans - $1 billion of which came via third-party partnerships. Home loans did not lag, jumping 38% in volume.

The customer base is swelling fast, too. SoFi added 756,000 new members in Q3, a 35% annual jump, bringing the total to nearly 9.4 million. Plus, 20% of new members opened a second product within 30 days, deepening customer loyalty. 

SoFi’s outlook is looking brighter, with management raising its adjusted net revenue guidance between $2.535 billion and $2.55 billion, up from the previous $2.43 billion to $2.47 billion range. This boosts the expected annual growth to 22% to 23%, compared to the growth range before.

SoFi anticipates lending revenue to hold steady at 2023 levels, financial services to soar over 80%, and tech platform revenue to surge in the low-to-high teens. With plans to add 2.3 million new members - 30% more than last year - SoFi is gearing up for a solid 2024. Meanwhile, the bottom line is estimated to land between $0.11 and $0.12 per share.

CEO Anthony Noto is bullish on SoFi's 2025 outlook, calling it the most favorable in seven years, with declining rates, a stable economy, and a diversified business. With improving delinquencies and strong performance in its non-lending segments, SoFi is positioned for growth. The “Trump trade” is also set to boost its student loan business, as less generous loan forgiveness policies could accelerate SoFi’s loan platform and bottom-line growth.

Analysts tracking SoFi forecast the company's profit for fiscal 2024 to surge 220% year over year to $0.12 per share, and grow by another 141.7% to $0.29 per share in fiscal 2025.

What Do Analysts Expect for SoFi Stock?

BofA analyst Mihir Bhatia is not sold on SoFi’s recent surge, downgrading the stock last week from "Neutral" to "Underperform" with a price target of $12. While the fintech’s recent performance has been solid, especially with student loan refinancing benefiting ahead of President-elect Donald Trump's second term, Bhatia sees its valuation running ahead of its fundamentals.

SoFi’s stock, now trading at a premium to peers, is priced at roughly 32 times 2026 earnings projections, which Bhatia argues is too high. Despite strong guidance for 2026, concerns linger around SoFi’s accounting and slower growth in its tech segment. In Bhatia’s view, further upside from these lofty levels seems unlikely. The BofA analyst sees the stock as “priced to perfection” for now.

SoFi's fiscal 2024 outlook looks solid, fueled by lower benchmark rates and a friendlier funding environment. However, Wall Street is still divided, with the stock currently having a “Hold” rating.

Out of the 17 analysts covering the stock, three are still optimistic with a “Strong Buy,” one leans towards a “Moderate Buy,” nine analysts are playing it safe with a “Hold,” one suggests a “Moderate Sell,” and the remaining three recommend a “Strong Sell.”

Notably, the stock trades at a premium to its mean price target of $10.93 and has a modest 15% upside potential to the Street-high price of $19.