SoFi Technologies Could Be a No-Brainer Buy in April

Shares of SoFi Technologies (NASDAQ: SOFI) are up an impressive 70% in the past 12 months. However, they have been extremely volatile. As of April 25, they trade 28% below their 52-week high.

Investors won't struggle to find reasons to like this digital banking powerhouse that's aiming to disrupt a massive industry. It's developing competitive strengths and still has a lot of growth potential.

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Here's why this fintech stock could be a no-brainer buy in April.

SoFI is looking at a huge goal

"It's a matter of when, not if we become a top 10 financial institution," CEO Anthony Noto said on the third-quarter 2024 earnings call. Noto could be referring to market cap, total assets, or even revenue. Regardless of what metric he's focused on with that ambitious goal, it's clear that SoFi still has a long runway for growth. That's impressive in what is considered to be an extremely mature industry.

SoFi continues to win over customers with its fully digital platform. There are no physical bank branches to invest in and maintain. This allows the leadership team to prioritize providing a superior tech-driven user experience. SoFi's customer base has expanded by 10-fold just in the last five years. This indicates the company's offerings, like checking/savings accounts, various loans, and investment brokerage, are resonating strongly with consumers.

According to Wall Street consensus analyst estimates, SoFi's revenue is projected to increase at a compound annual rate of 18.5% over the next three years.

The customer base is growing, and there is a significant opportunity to cross-sell products. For example, someone who has a checking account with SoFi could eventually take out a loan. And it helps that the business typically brings on a younger demographic that has greater lifetime value.

Building competitive strengths

Companies with an economic moat are considered high-quality because they can defend themselves against the constant threat of competition. Dominant financial services entities, like JPMorgan Chase and Bank of America, fit this category. They typically benefit from switching costs and a cost advantage.

Founded in 2011, SoFi is still a newbie in the industry. However, it's trending in the right direction in terms of developing durable competitive strengths. Customers will deal with switching costs as time passes and they sign up for more products from SoFi. Of course, this depends on the business continuing to expand its offerings to cater to a variety of customers' financial needs.

As mentioned, SoFi doesn't have a physical retail presence, which can lower overhead costs. Some of its biggest expense categories are, unsurprisingly, technology and product development, and sales and marketing. Investors shouldn't want the leadership team to pare back in these areas as it would likely stunt growth. But as revenue continues to grow, SoFi should see some operating leverage, which can lead to an improving bottom line.

Banking on higher profits

Adding to that last point, SoFi is already showing signs of improvement. It posted $0.46 in earnings per share (EPS) in 2024, the company's first year of GAAP profit. And management expects to make major strides in building on this success.

SoFi's 2026 EPS is forecast to total $0.68 (at the midpoint) in 2026. In the years following, the business should see annualized growth of 20% to 25%. It's usually wise to take any executive team's financial forecasts with a grain of salt, but based on the positive factors discussed, it's easy to be optimistic in this situation.

The stock trades at $12.89 today (April 25). Based on the EPS estimate for 2027 of $0.83, this implies a three-year forward P/E of 15.5. That looks like a reasonable deal to buy this rising fintech enterprise.

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Bank of America is an advertising partner of Motley Fool Money. JPMorgan Chase is an advertising partner of Motley Fool Money. Neil Patel has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Bank of America and JPMorgan Chase. The Motley Fool has a disclosure policy.