SoFi reported its Q2 earnings this morning, once again delivering record-breaking results—something that has become the norm for the company. Despite that, the stock fell as much as 11% intraday before closing down roughly 9%, which has also become the norm after SoFi earnings reports.
I've heard the bearish arguments, and they make less sense to me with each passing quarter. At some point, you have to ask: if not now, when?
After today's selloff, SoFi is trading at a P/E ratio of around 35. One of the most common bear arguments is that SoFi is "just a bank" and should trade at a valuation similar to traditional banks. But even if you ignore every other part of the business and value it solely as a bank, it's still one of the fastest-growing banks in the country.
SoFi is adding more than 10,000 new members every single day, and that pace has continued to accelerate for years. Its digital-first model also gives it a significant cost advantage over traditional banks, allowing it to scale without the expense of maintaining thousands of physical branches.
Member growth and revenue growth continue to outpace many of the largest banks by a wide margin. If SoFi is growing two to five times faster than many of its peers, why shouldn't it command a higher valuation multiple?
And that's without considering the rest of the business. SoFi is far more than a traditional bank. Its financial services ecosystem continues to expand, its technology platform is growing, and the company has built multiple revenue streams that differentiate it from legacy financial institutions.
Management has stated that it expects this rapid growth to continue through at least 2028. If that's the case, the question becomes even more compelling: when will SoFi actually be considered a good buy? If the company continues executing at its current pace, there may come a point where the market has no choice but to value it differently than a traditional bank. If that happens, today's valuation could look remarkably cheap in hindsight.
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