SoFi Technologies: Buy, Sell, or Hold?

SoFi Technologies (NASDAQ: SOFI) remains an up-and-coming star in the financial sector. Users are flocking to the digital bank's do-it-all super app, and cross-selling opportunities are driving substantial growth that could have legacy brick-and-mortar banks looking over their shoulders.

Owning the stock has been a wild ride. Investors waited several years for SoFi to rebound after plunging from its 2021 highs, and they finally got a substantial breakout in late 2024. However, the stock dipped again amid the recently heightened volatility across the broader market.

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So how should investors react to SoFi on the dip?

SoFi's business continues to head in the right direction

If SoFi's shareholders can hang their hats on anything, it's the company's consistently stellar growth. It's a digital bank without physical locations, offering various products and services on its website and smartphone super app. Essentially, SoFi wants to be a digital banking one-stop shop for its customers, and the model seems to work.

SoFi has grown its customer base from 1.8 million members in 2020 to 10.1 million in 2024, an impressive leap in just five years. Additionally, SoFi owns and operates Galileo, a financial technology platform that powers numerous fintech apps. As a whole, SoFi's business has steadily grown, and its net income turned positive in 2024.

SOFI Revenue (TTM) data by YCharts.

SoFi's member base grew 34% in 2024, which sets a high growth floor. Its members also use, on average, approximately 1.5 of its products, meaning it still has plenty of opportunities to cross-sell products and services to its established customers, which should fuel growth further.

Should investors worry about a potential recession?

Fears that the U.S. is heading toward a recession are rising, which could help explain SoFi stock's recent slip. Nobody knows whether a recession will occur or how severe one could be, but the economic warning signs are flashing. The Federal Reserve Bank of Atlanta predicts a 0.5% economic contraction, net of gold imports and exports, in Q1.

Meanwhile, U.S. consumers are struggling. The household savings rate is near its decade low, credit card debt is at an all-time high, and auto loan delinquencies are at their highest since the COVID-19 pandemic. Consumer sentiment is in the gutter, at levels only seen occasionally since the 1950s. In other words, consumers seem to be struggling financially and are less likely to spend or borrow.

SoFi is ultimately a bank, which makes it vulnerable to recessions. It isn't good for business when people bank and borrow less, and don't pay their loans.

Thus far, SoFi doesn't seem to be feeling too much pain. The percentage of 90-plus-day delinquencies on personal loans was just 0.55% in Q4 2024, its lowest level since Q3 2023. However, investors should pay close attention to potential trend changes in upcoming Q1 numbers. Much of the deterioration in U.S. economic data began in 2025.

There is always risk in buying bank stocks, but investors shouldn't worry too much. SoFi and other banks must abide by regulatory capital requirements designed to ensure their financial stability even in the case of economic turbulence. SoFi goes above and beyond the minimum requirements.

Image source: SoFi Technologies 2024 10-K.

SoFi is exceeding the required ratios by a notable margin, which indicates that management takes risk seriously and is giving the business additional financial buffers that will protect it in the event of a recession.

SoFi Technologies: buy, sell, or hold

Today, SoFi trades at nearly twice its book value, and generally speaking, the stock has traded at a premium to most of America's leading banks (like JPMorgan Chase, Bank of America, and Citigroup) for a while.

SOFI Price to Book Value data by YCharts.

Although SoFi hasn't been banking as long and isn't as proven as its competitors, its rampant growth is hard to ignore. SoFi's willingness to operate with a capital buffer beyond the regulatory minimum is encouraging, and its lending metrics have held up thus far. If trouble does hit the financial sector, it will impact almost every bank, not just SoFi. That's the reality of investing in bank stocks.

Therefore, it looks like SoFi will be a buy once the stock is trading on par (or better) with its brick-and-mortar peers. At that point, it would be hard not to like SoFi's long-term potential as an industry disruptor if it continues attracting more members to its ecosystem. However, the stock is still just a little too expensive despite its recent drop, making SoFi a hold while investors wait for a better buying opportunity.

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Bank of America is an advertising partner of Motley Fool Money. Citigroup is an advertising partner of Motley Fool Money. JPMorgan Chase is an advertising partner of Motley Fool Money. Justin Pope 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.