SoFi Technologies (NASDAQ: SOFI) is a digital financial services provider that offers a range of products from personal loans and mortgages to credit cards and brokerage services. Management estimates its addressable market at $ 2 trillion, which presents investors with a huge opportunity.
In this Backstage Pass video, recorded on October 14, 2021Motley Fool contributor Matt Frankel, CFP, shares his thoughts on SoFi’s upcoming third quarter earnings report, scheduled for November 10. He also explains why this fintech company could be the next Square.
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Matt Frankel: SoFi, Social Finance was released to the public by SPAC earlier this year. Their number is simply phenomenal. I think this company could be the next one Square, and I’ll show you why.
Their membership growth hasn’t really grown impressively, growing 113% year-over-year – who cares about profits when you have that growth right now? But it is accelerating. Eight consecutive quarters. Look at that lower number, year over year growth, their growth rate has accelerated for eight consecutive quarters.
Product growth is also accelerating. Look at the last seven quarters there, 71%, 85%, 89%, 101% – it picks up and picks up, momentum just wins and wins. It’s a pretty impressive clientele. 2.5 million people are not Square. Square has, I think, 30 million active Cash App users, a few million more in its business ecosystem. So the real key here, look at this rate here. So far he started his life as a lender. They do private student loans, they do personal loans, things like that. On the left you can see the growth of their loan products. Its good; it has been in adolescence for a few quarters. This is not where the growth of the company comes from.
They are strongly developing their other product offerings. They offer an investment platform and they are all very innovative. Their investment platform is one of the few that allows everyday investors to participate in IPOs. I think they and Robinhood are the only two doing this. They have their own ETFs. They have an ETF that pays weekly dividends, which is the only one I know of. Really unique products they offer.
SoFi Money is their banking platform. It advances their customers, their direct deposits two days before payday, really cool feature. These are the financial services products as you see on the right. Look at this growth. I was a math teacher and if I taught a lesson about exponential growth this could be one of the charts I used as an example in class. This is an exponentially growing clientele.
If you look at the number here and compare it to their customer count, the average SoFi customer currently has around 1.5 products with the company, a ton of product cross-sell potential. Very quickly, I will jump all the way to the bottom. Here are some of their current financial services products. The average customer uses about 1.5 products. Not only is their user base growing by over 100% year over year, but there’s also this long list of products – which is growing rapidly, by the way. The credit card just launched this year, the investment platform has improved a lot this year and is really gaining ground. So not only has their user base more than doubled year over year, but they also have the opportunity to sell all of these products to their existing customers.
Right now, SoFi’s market cap is around $ 15 billion. If things go well and that momentum continues, I think it could be 10 baggers within a decade. But this is one of the ones that I watch. But the key is for that growth to continue at this triple-digit rate, which obviously can’t be sustained indefinitely, but can they keep it up for a bit longer? This is what I want to know. There are my thoughts on SoFi.
Matthew Frankel, CFP® owns shares of SoFi Technologies, Inc. and Square. Trevor Jennevine owns shares of Square. The Motley Fool owns shares and recommends SoFi Technologies, Inc. and Square. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.