Oguz O. | 𝕏 Capitalist 💸

1/ $SOFI train is taking off.

Revenues are exploding, margins are expanding, and now crypto is also coming back to $SOFI.

Stock is up 33% last month and it's just the beginning...

Here is my $SOFI investment thesis: 🧵 

2/ $SOFI is rapidly turning into a one-stop shop for all financial services.

They offer a full suite of banking &amp; investment products through a fully mobile experience.

This one-stop shop offers incredible value to members.

Active members quadrupled since June 2021: 

2/ Result? Revenues grew from $253 million in 2021 to $1.2 billion in 2024.

What's more important is that 41% of the revenue came from fee-based sources such as Galileo, Loan Platform, Sofi Invest, etc..

It's just beginning. $SOFi will see accelerating growth and expanding multiples going forward. 

Let me explain:

3/ $SOFI was primarily a lending business.

Its quarterly origination volume doubled from 2019 to 2024, growing 15% YoY.

When the Fed started raising rates, it doubled down on its fintech business to compensate for the slowdown in lending.

It worked incredibly. 

4/ Its financial services revenue grew 54% last year while lending grew only 18%.

Staggering 53% of all revenue comes from financial services and tech platforms now.

This alone rebuts the argument that $SOFI is just a bank.

No, it's a giant fintech that owns a bank. 

5/ This shift to fee-based revenue will accelerate.

Last year, it created a loan platform business (LPB) to drive fee-based growth.

In LPB, $SOFI originates the loan to qualified borrowers in its user base on behalf of third parties in exchange for fees.

Zero risk business. 

6/ Loan Platform Business scaled incredibly fast.

After launch in Q3 2024, it added $100 million fee-based incremental revenue.

This is just the beginning.

$SOFI signed a $5 billion deal with Blue Owl Financials in April in addition to the $2 billion they signed with Fortress Capital in Q4 2024.

LBP will generate $200-$250 million fee-based revenue only from these deals.

7/ Lending is also set to accelerate alongside fee-based businesses.

After the Fed cut rates last September, its loan originations grew by 66% while the segment revenue grew by 27%.

As the Fed is set to cut rates once again in its September meeting, lending can accelerate even further.

8/ Crypto is also coming back to $SOFI.

Crypto is how modern brokerages like $HOOD grew so fast. 

It's a cash-cow.

For reference, $HOOD generated over $330 million in crypto revenue last quarter, and it was 30% of their total revenue.

They have already recruited some test users for crypto transactions.

9/ Global payments are coming too.

$SOFI will use Bitcoin to convert the USD to international currencies.

This is a giant market that is completely fee-based.

Listen from the CEO himself: 

10/ It's still attractive.

Management expected 26% annual revenue growth by 2026 and 20% annual growth beyond that until 2030.

This was excluding crypto.

Now that crypto is coming back and Level-1 Options and global money remittance are about to be launched too, I think it can grow 25% annually until 2030.

This gives us $8.2 billion in revenue in 2030.

Leading digital banks like $NU have above 20% net margin. Even if we assume $SOFI net margin will be just 20%, it'll generate $1.6 billion net income.

At 25 times exit multiple, we will get a $24 billion company. It's valued at  $20 billion today.

Given the quality of the company and serious growth potential beyond the forecast period, I think it's a favorable proposition.

Do you want to become a better investor?

I share all my insights in my free weekly newsletter.

Join 18,000+ readers to become a better investor.

You will also get a free e-book when you join 👇
https://www.capitalist-letters.com/