Why Is SoFi Technologies Stock Up Over 140% in the Second Half of 2024?

TradingKey - During the Covid-19 pandemic, many investors were drawn into the growth prospects of financial technology, or fintech companies. Many of these promised to do things better, and faster, than banks.

While that enthusiasm has been scaled back, there are still some interesting companies operating in the fintech space. One of them is SoFi Technologies (NASDAQ: SOFI) and it’s been one of the standout performers in the stock market this year, with its shares soaring over 140% in the second half of 2024 alone. 

This remarkable rally has caught the attention of investors, and for good reason. SoFi is not just another fintech company – it’s a disruptive force in the financial services industry, with high growth potential and improving fundamentals that make it an attractive investment.

Here’s why SoFi’s stock has been on a tear and why it’s gaining traction among investors who want to own companies that are disrupting the financial services incumbents.

Disruptive fintech powerhouse

At its core, SoFi is an all-in-one digital financial platform that aims to simplify and improve how people manage their money. Unlike traditional banks, though, SoFi offers a broad suite of services under one roof, including personal loans, student loan refinancing, home loans, checking and savings accounts, credit cards, and investment products. 

This comprehensive ecosystem is designed to attract and retain customers, creating a flywheel effect where users engage with multiple products over time. 

SoFi’s strategy is particularly appealing to younger, tech-savvy consumers who prioritise convenience and digital-first solutions. By removing the friction associated with traditional banking and offering competitive rates, SoFi has positioned itself as a go-to platform for those seeking a modern financial experience.

High growth and expanding membership

SoFi’s rapid growth is one of the key factors driving its stock’s upward trajectory. In Q3 2024, the company added 756,000 new members, a 35% year-on-year increase, bringing its total membership to 9.4 million. 

These numbers are not just impressive. They also serve to highlight the effectiveness of SoFi’s business model and marketing strategy in attracting and retaining users.

This growth isn’t limited to membership. SoFi’s financial products have also seen significant expansion, with the company now offering 13.7 million products, up 31% from the previous year. Notably, 32% of these products were adopted by existing members, demonstrating strong cross-selling capabilities and the value of its integrated ecosystem.

Falling loan delinquencies: Key catalyst for 2024 rally

One of the most compelling aspects of SoFi’s recent performance is the improvement in its loan portfolio quality. Delinquencies and charge-offs, which had been a concern during periods of economic uncertainty, have shown consistent improvement. 

For instance, the annualised charge-off rate for personal loans fell to 3.52% in the Q3 2024, down from 3.84% in the previous quarter. These falling delinquencies not only reflect a strong credit environment but also underscore SoFi’s prudent underwriting practices. 

The company’s borrowers are high quality, with personal loan customers boasting an average income of US$164,000 and a FICO score of 746. This focus on creditworthy borrowers has allowed SoFi to scale its lending business while minimising risk, a combination that is particularly attractive to investors.

Strong earnings momentum

While the focus remains on SoFi’s long-term growth story, its recent financial performance adds credibility to its bullish story. In Q3 2024, SoFi delivered record revenue of US$689 million, up 30% year-on-year. The company also posted its fourth consecutive quarter of profitability, with net income reaching US$61 million.

These results demonstrate SoFi’s ability to grow revenue while improving operational efficiency, a rare achievement for a fintech company in its growth phase. More importantly, they reinforce investor confidence in SoFi’s ability to execute its ambitious plans.

Why investors are excited about SoFi’s future

Looking ahead, SoFi is well-positioned to capitalise on favourable tailwinds in the macroeconomic environment. The company expects to benefit from a declining interest rate environment and stable economic conditions in 2025. 

Its diversified revenue streams, robust customer growth, and focus on innovation provide a solid foundation for continued success. With its all-in-one platform, SoFi is not just riding the fintech wave – it’s shaping the future of finance. 

For investors seeking exposure to a high-growth, disruptive company, SoFi Technologies is a name to watch closely. The second half of 2024 has proven that this fintech leader is just getting started and 2025 could hold even more promise for investors.