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Buy SoFi Stock, Analyst Says. The Fintech Is Set to Deliver Strong Revenue Growth.

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SoFi has been focused on member growth, according to BofA.

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SoFi

Technologies stock is a buy because the company will deliver strong revenue growth thanks to its member growth and vertically integrated platform, BofA said Friday.

Analyst Mihir Bhatia initiated coverage on the financial services platform on Friday with a Buy rating and a price target of $17.

The stock (ticker: SOFI) rose 6.3% to $13.17 on the news in recent trading. It has fallen 17% year to date.

Bhatia estimates a revenue growth rate of more than 40% compounded annually from 2021 to 2024. In addition, he expects a substantial margin expansion to 22% in 2022 from 3% in 2021.

“Sofi has more recently been focused on driving member growth at the top of the funnel,” he noted, citing the company’s traditional products like SoFi Money, SoFi Invest, and money tracker SoFi Relay. And then it cross-sells additional products such as student loans, home loans, and personal loans, he noted.

Bhatia pointed to SoFi’s acquisition of personal finance business, Galileo, that looks to drive faster innovation and improve unit economics. “SOFI has invested in improving Galileo’s capabilities for its own business and then it can offer those capabilities to other neobank clients,” he noted. Galileo improved SOFI Money’s unit economics by about 20% and lowered costs, the analyst stated.

The company also completed its acquisition of Sacramento’s Golden Pacific Bancorp earlier in February, and it received approval to become a bank holding company in January. “We view the Bank Charter approval as an important step and believe it will have positive financial and non-financial impacts,” the analyst stated.

SoFi will report its fourth-quarter earnings on March 1. The company reported third-quarter adjusted Ebitda (earnings before interest, taxes, depreciation, and amortization) of $10.26 million, above analysts’ forecasts of $3.8 million. Revenue for that quarter was $277.2 million, higher than analysts’ expectation of $251.5 million.

Write to Karishma Vanjani at karishma.vanjani@dowjones.com

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