Is SOFI Stock A Buy After Its 15% Rally?

Published: Friday, June 20, 2025 at 10:25 am

SoFi Stock Faces Scrutiny Despite Recent Rally

SoFi Technologies (SOFI) has experienced a notable surge in its stock price, increasing by over 15% in the past month. This rise appears to be partially driven by the successful initial public offering (IPO) of Chime, which has seemingly boosted investor confidence in the fintech sector. However, despite this recent positive momentum, analysts are raising concerns about SoFi's current valuation.

A comprehensive analysis comparing SoFi's valuation with its operating performance and financial health reveals a mixed picture. While the company demonstrates strong revenue growth, its profitability and resilience during economic downturns raise questions.

SoFi's revenue growth has been substantial, averaging 36.2% over the last three years, significantly outpacing the S&P 500's 5.5% growth. In the last 12 months, SoFi's revenues grew by 25.9%, reaching $2.8 billion. Quarterly revenues also saw a significant increase of 31.7% to $772 million.

However, SoFi's profitability lags behind many companies. The company's operating cash flow margin is notably negative at -65.6%. While the net income margin is moderate at 17.2%, the overall profitability picture is a concern.

Financially, SoFi's balance sheet appears strong, with a moderate debt-to-equity ratio of 19.8% and a strong cash-to-assets ratio of 11.2%.

Despite these strengths, SoFi's stock has shown limited resilience during economic downturns. During the 2022 inflation shock, the stock fell by 83.3%, significantly more than the S&P 500's decline. Similarly, during the COVID-19 pandemic, SoFi's stock experienced a more substantial drop compared to the broader market.

Analysts have concluded that SoFi's performance across key parameters is neutral. Considering its high valuation compared to the S&P 500, with a price-to-sales ratio of 5.9 versus the benchmark's 3.1 and a price-to-earnings ratio of 32.9 versus the benchmark's 26.9, the stock is currently deemed unattractive.

BNN's Perspective: While SoFi's revenue growth is impressive, the company's profitability and vulnerability to economic downturns warrant caution. Investors should carefully weigh the risks associated with the stock's current valuation, especially considering the broader market uncertainties. Alternative investment strategies, such as the Trefis High Quality portfolio, may offer a more balanced approach for investors seeking to mitigate risk.

Keywords: SoFi, SOFI, stock, fintech, IPO, Chime, valuation, revenue growth, profitability, financial stability, downturn resilience, S&P 500, price-to-sales ratio, price-to-earnings ratio, investment, market crash, inflation shock, COVID-19 pandemic.

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