2 Reasons to Buy SoFi Stock Today -- and 2 Big Reasons to Be Cautious

Core Viewpoint - SoFi is positioning itself as a significant disruptor in the banking industry, aiming to replace traditional banking relationships while facing challenges such as high default rates and slowing growth in key areas [4][11]. Group 1: Company Progress and Potential - SoFi's deposit base has grown significantly from zero in early 2022 to nearly matching its loan portfolio, enhancing cross-selling opportunities and reducing customer acquisition costs [3]. - The platform has surpassed 8 million members in Q1 2024, up from fewer than 2 million at the start of 2021, reflecting a year-over-year growth rate of 44% [5]. - The credit card business is seen as a potential growth driver, with management in "full investment mode" to expand its portfolio [6]. - The ratio of financial products to loans has increased from 4.1-to-1 in 2022 to 5.9-to-1 today, indicating a shift towards more diverse financial offerings [13]. Group 2: Challenges and Caution - SoFi's net charge-off (NCO) ratio on personal loans was 3.5% in Q1 2024, which is higher than expected, especially when compared to American Express's 2.1% [16]. - Default rates are trending higher, with the NCO rate increasing by about 50 basis points compared to Q1 2023, which could impact margins if it continues to rise [8]. - Growth rates are slowing, with the total number of products growing by only 38% in Q1, the slowest pace since going public, and sequential revenue decline compared to Q4 [9][17]. Group 3: Valuation and Future Outlook - Management has guided for earnings per share of $0.55 to $0.80 by 2026, with anticipated annual EPS growth of 20% to 25% thereafter, suggesting attractive valuation for long-term investors [18].