$SOFI · The Motley Fool · 2026-10-27

SoFi is flying, We'll talk about Sofa, But as I said at the beginning , we'll start with Sofa because right now as we're recording, the share price is up about 16%, which is a reflection of their recent quarterly earnings.

Matt, this is a company you follow regularly. I think we discussed this several times , and there was some disagreement about whether the company was doing well or not. Yes, I will talk about the 2027 forecast.

I want to take you back to the second quarter report period, when their stock fell, even though they beat expectations. This was because they did well on their second quarter numbers but did not raise guidance for the rest of the year, which meant the second half of the year would not be very good.

In the third quarter, we not only saw full- year guidance increase, signaling a better fourth quarter, but the company also provided 2027 guidance for the first time, which was much better than market expectations.

They are expecting earnings of 90 cents per share. According to their current guidance, this is 48% growth per year. 27% revenue growth, excellent margins, and margins are expected to improve further.

I would say business is doing well , and the market seems to agree. When we are recording, it is about 15% up. Although it is still slightly down for the year. The thing I'm looking at is cross-sell.

And the condition of cross-sell is very deplorable. Their average number of products per member is 1.56. A year ago it was 1.47. The company calls it mobility. Ordinary community banks say this is very disappointing.

On average, a community bank has 2.3 to 3 products per customer.

Look, if you look at it optimistically, you can take this as an opportunity. If you start cross-selling to these customers , you can grow. The empty part of the glass is that they haven't done that yet and they are using loss rates to attract new customers, but they are not yet able to do cross-selling, which is something they need to work on to improve.

I think it's fair to say that the market is a bit hesitant about what to do with SoFi. I do n't really know how to evaluate it. You know, on one hand it's fast- growing fintech, on the other hand it sounds a lot like a bank.

It sounds like a bank, flaps its wings like a bank, but it's not a bank, right ? This is a fintech. So it's in a strange position , revenue is growing very quickly, but margins are starting to decline in certain areas.

Your personal debt and student loans are more concentrated than your mortgage. It's pulling in many different directions here. Look, I disagree a bit on the issue of margin reduction.

Personal loans are generally higher margin products than mortgages. Their contribution margins in the financial services segment have declined. I'm pretty sure that's what you're technically talking about.

This is largely due to the mix of cheap products, which are designed solely to engage customers. Think about the crypto tools they are bringing to the market. These do n't make a lot of money, but they are tools to keep customers engaged.

Speaking of net margin, i.e. net profit, in terms of GAAP earnings, their GAAP net margin increased from 14% to 17% last year. Their fee- based revenue, such as their new membership program, is a high- margin part of the business and has consistently grown by 21%.

So, the issue of margins is a bit stronger than it seems from the outside.

Yes, and part of that is due to the product mix. And look, we'll see how it works. Matt, you are right. Personal loans have higher margins and higher interest rates. This is a large part of the growth in lending.

New customers are coming in need of personal loans.

Look, the downside is, and again, I do n't want to be pessimistic, but I think we have to say that they are aggressively adding high-risk loans to the subprime market. They are not alone here.

That might be okay. But yes, the margins they get are by attracting new customers who are not experienced and offering them high-risk products. So, hopefully the economy will survive.

Yes. And that leads to that tension in the product mix that maybe makes it a little bit riskier than traditional mortgage lending and other things. Again, the market does n't really know what to make of SoFi stock.

Lu already mentioned the cross-buy ratio. This is the number of products per customer, which is both an opportunity and a challenge. But I will talk about return on tangible common equity (ROE).

This is a banking metric. At the end of the day, it is a bank. Currently, their return on tangible common equity is around 10%. This is up from 8% a year ago. Management's long-term goal is in the 20 to 30% range.

Frankly, a bank that earns 20% or more return on tangible capital should have a higher price-to-book ratio. So, to be honest , Sofa doesn't currently deserve the high price-to-book ratio it once had.

They are currently trading at about 18 times their 2027 earnings. Considering the growth rate of the business, I would say a price of 20 to 25 times earnings is reasonable, which falls in the range of $18 to $22.

This seems to me to be an interesting assessment in this uncertain environment.

Yes, it would be really interesting for a bank. Look, Taylor, I'll try to solve this market dilemma. The 'fin' or financial side of this fintech looks much better than the 'tech' or technology side.

Tech platform revenue fell 24%. Its revenue is under $100 million. This is not worth discussing. What is this, 6% of total revenue? That's fine, because it's a bank and according to Matt's point, it should be evaluated as a bank.

This is trading at double the multiple of many good bank franchises. I accept that it is growing fast and maybe it deserves a higher multiple than others. However, I repeat , there are some conditions attached to that growth.

The question for investors is, how much premium are you willing to pay for the currently very low growth? Personally , I'd rather wait and see if they actually build relationships and see some growth coming from cross-selling that I can rely on more than I currently do.