Is SoFi a millionaire generator?

SoFi technologies (SOFI) is well known for approaching the financial services industry with a user-friendly focus. And it does a wonderful job of gaining customers.

But for such an innovative business, this fintech stock it was extremely disappointing. It has fallen 33% in 2024 (as of August 2nd) and is currently trading at 74% of its February 2021 peak.

Maybe now is a good time to get SoFi shares on the decline. But is this stock a millionaire?

Disruption of financial services

What SoFi has achieved in the 13 years since its inception is commendable. The company is disrupting financial services with its digital-only offerings, giving its customers a better user experience compared to what traditional banks are known for. Through the SoFi mobile app, you can open a checking or savings account, invest in stocks or cryptocurrencies, and get a personal loan.

The strategy is simple. SoFi’s management team is focused on introducing new products and services while targeting younger and more affluent consumers. What started as a student loan refinancer is now a well-respected banking entity.

Of course, growth has slowed. Gone are the days of 50% or more in annual revenue gains. However, SoFi continues to expand at a healthy pace, which is even more impressive given the uncertain economic environment the US has been in.

In the second quarter, the business posted sales of $599 million, up 20 percent year over year. That was driven by SoFi adding 643,000 new customers (which it calls members), bringing the total to nearly 8.8 million.

SoFi’s total addressable market is anyone’s guess. However, the domestic banking industry is truly massive. CEO Anthony Noto said he wants it to be a top 10 financial institution one day.

SoFi’s Profit Potential

The typical playbook for many technology development companies is that they invest all their resources in customer acquisition, putting money behind product development and marketing efforts. To be clear, SoFi has historically adopted this strategy. But now it’s starting to pay off.

That’s because the business is now profitable. In fact, the company’s $17 million Q2 net income it was the third consecutive quarter of a positive result.

SoFi does not operate any physical bank branches. This digital approach should, in theory, result in a scalable business model. A largely fixed cost structure can lead to profits once a certain level of income is reached. SoFi seems to have passed that point. Of course, the company will continue to spend on marketing and product development, but those investments are now leveraged on a larger sales and customer base.

Executives believe the future is extremely bright. They raised their guidance for the full year, now forecasting net income between $175 million and $185 million. And in 2026, SoFi is expected to report earnings per share of $0.68 (mid), with annual growth of 20% to 25% thereafter. It’s hard not to be optimistic when you think about these goals.

Joining the seven figure club

Based on its growth numbers, along with the start of what appears to be consistent profit generation, SoFi looks like a solid business that should be on investors’ radar. But can stocks make you a millionaire?

Since SoFi stock has underperformed, it is trading at a reasonable level the price-to-sales ratio from 2.9. That’s well below its historical average and adds upside potential to the equation should the market reprice the stock higher.

If you are bullish on SoFi, then it makes sense to buy shares with the intention of holding for a few years. Those who are not only able to invest more capital up front, but who can extend their time horizon, have a better chance of reaching millionaire status.