It’s up 92% this year.
The S&P 500 is hitting new highs, and there are signs of a potential stock market bubble. But whatever happens in the short term, the stock market has been a reliable wealth generator for decades, as long as investors hold through volatility. Is there a stock market bubble? Will it pop? There’s no way to know, and it shouldn’t matter too much to the long-term investor.
If you start investing now, you will be well on your way to creating wealth over many years. Can SoFi Technologies (SOFI 6.15%) stock be a part of a portfolio that sets you up for life?
The new way to bank
SoFi is one of a cadre of digital banks that are changing the way Americans manage their finances. It’s all online, it’s easy to use, and it has a large variety of products and services. Management sees this one-stop shop approach as its signature and the way it stands out from the crowd.
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There are other ways it stands out. One is its focus on lending. The company has roots as a lending cooperative supporting university students with loans. Lending is still its core segment, accounting for about half of total revenue, or $493 million in the 2025 third quarter.
Another is its younger target market. It started out targeting college students, and young professionals who are just getting started in their careers are still its core clientele. Management envisions a growth process where these young users start out with a product, such as a student loan, and increase product adoption as their financial needs evolve and grow. That could lead to a credit card, then a savings account, and maybe a mortgage.
The model is working
SoFi has been reporting fantastic growth during the past few years, as well as increasing profits as it scales. In Q3, adjusted net revenue rose 38% year over year, and earnings per share (EPS) increased from $0.05 to $0.11.
There was growth across the board in the quarter, with a 25% increase in lending revenue and a 12% increase in Tech Platform revenue, its business-to-business product. But the standout segment has been financial services, which are all of the non-lending products. Revenue for the segment increased 76% year over year, and contribution profit was up 126%. Contribution margin widened by 12 percentage points to 54%.
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SoFi has huge opportunities in this area as it rolls out new, innovative products. The market has been reacting enthusiastically to the company’s latest announcements, including the return of cryptocurrency trading to its app and the launch of a global remittance product.
All of the categories, but most acutely the lending business, are benefiting from lower interest rates. Lower interest rates make it cheaper to borrow money, and they also boost the economy in general, since there’s more money to go around.
What are the risks?
The market was worried about SoFi last year, when interest rates were elevated and it looked like the lending business would be hurt. That’s normal for any bank, but since SoFi is still small, and the lending segment is such an integral part of its business, this effect is felt more than it is at the larger banks. In the end, the lending segment performed well for the year, but banking is a cyclical business that is strongly influenced by interest rate trends. The good news is that as SoFi gets bigger and varies its product base, future cycles shouldn’t be as worrisome.
Another risk is SoFi’s high valuation. It trades at a price-to-earnings (P/E) ratio 52 of and a price-to-book ratio of 4. Those are high numbers for a bank. However, SoFi is also growing much faster than other banks, which is why it gets a premium. Over time, it should grow into the valuation.
There are plenty of reasons to be confident. The company has demonstrated resilience, efficiency, and innovation, and the platform is attracting new business at a fast pace; SoFi continues to report record new account each quarter, with 905,000 in the third quarter. Sales of new products are increasingly coming from existing users, which means its cross-selling strategy is working.
Management has a goal of becoming a top-10 U.S. bank, and it’s on its way. As it generates higher revenue and earnings, the stock could soar during the next few years, and it could be a significant addition to a portfolio that could set you up for life.
