SoFi (SOFI): Assessing Valuation After Earnings Beat and Upgraded Full-Year Guidance

Shares of SoFi Technologies (SOFI) have been on a tear lately, and for good reason. A series of strong catalysts have come together over the past month, with the most significant being a knockout quarterly earnings report showing surging revenue and profits, the company’s decision to boost its full-year outlook, and a chorus of analyst upgrades reflecting new confidence in SOFI’s growth story. Adding in the Federal Reserve's recent softer tone on interest rates, it is clear why investors are taking a fresh look at SoFi’s future potential.

The excitement is not just about a single quarter. SoFi’s stock has now climbed 60% since January and is setting new 52-week highs, driven by momentum in its lending and digital banking businesses. Over the past month alone, shares are up nearly 18%, as the company announced innovative product launches in crypto and international transfers. This series of positive developments, set against a backdrop of improving profitability and a recovering tech sector, is fueling the current rally and changing how the market views SoFi’s risk and reward profile.

With the stock’s powerful move this year, the big question is whether SoFi is now attractively valued for new buyers, or if the market is already factoring in more growth ahead than the fundamentals warrant.

Most Popular Narrative: 78.7% Overvalued

According to the narrative by yiannisz, SoFi Technologies is currently viewed as substantially overvalued compared to its estimated fair value. This suggests a significant premium in the share price.

SoFi raised its annual revenue growth guidance for 2024 to 22% to 23% year over year, up from an initial projection of 14% to 16%. This upward revision reflects confidence in maintaining growth in both lending and non-lending segments. The ratio of financial services products to lending products increased from 3.1 times in 2021 to 6.2 times in 2024, demonstrating efforts toward a more balanced and diversified revenue model.

Why does the market assign such a large premium to SoFi? The answer may lie in bold assumptions about future growth and margin expansion supporting this narrative. If you want to explore the reasoning behind this valuation gap, consider which projections are driving the current price and what factors could shift expectations.

Result: Fair Value of $14.00 (OVERVALUED)

Have a read of the narrative in full and understand what's behind the forecasts.

However, unforeseen regulatory challenges or a sharp decline in net interest margins could quickly undermine the bullish view on SoFi’s current valuation.

Find out about the key risks to this SoFi Technologies narrative.

Another View: Discounted Cash Flow Model

While the current narrative spotlights SoFi’s premium valuation, the SWS DCF model presents a similar perspective. It suggests that the share price remains ahead of its fundamentals. Could differing views on growth explain this gap?

Look into how the SWS DCF model arrives at its fair value.

Simply Wall St performs a discounted cash flow (DCF) on every stock in the world every day (check out SoFi Technologies for example). We show the entire calculation in full. You can track the result in your watchlist or portfolio and be alerted when this changes, or use our stock screener to discover undervalued stocks based on their cash flows. If you save a screener we even alert you when new companies match - so you never miss a potential opportunity.

Build Your Own SoFi Technologies Narrative

If you see things differently or want to dig deeper into the numbers, you can craft your own SoFi Technologies story in just a few minutes. So why not do it your way?

A great starting point for your SoFi Technologies research is our analysis highlighting 2 key rewards and 1 important warning sign that could impact your investment decision.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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