SoFi Technologies’ ambitious guidance, forecasting $0.80 in GAAP earnings per share by 2026 and sustained growth of 20-25% thereafter, has understandably sparked vigorous debate about its future valuation. This projection implies a dramatic operational ramp-up from its recent performance, presenting a narrative that is part high-growth fintech and part regulated banking institution, a duality that makes any simple valuation exercise fraught with assumptions.
Key Takeaways
- SoFi’s path to its $0.80 EPS target for 2026 demands near-flawless execution in both scaling its three business segments and expanding profit margins in a challenging macro environment.
- The widely circulated price target of $28 hinges on a 35x price-to-earnings multiple, a figure that appears optimistic when compared to fintech peers and the likely valuation compression as the company matures.
- Credit quality remains a pivotal risk. As a chartered bank, rising delinquencies in its unsecured personal loan portfolio could significantly impact profitability and attract greater regulatory scrutiny.
- The company’s valuation may ultimately be determined by the market’s perception of its technology platform (Galileo and Technisys), which holds the potential for higher, SaaS-like multiples separate from the lending business.
Anatomy of an Ambitious Forecast
An observation from analyst ‘patientinvestt’ highlighted the potential for significant upside based on these long-term targets, a conclusion that merits a deeper, more critical examination. To achieve its 2026 guidance, SoFi must navigate a complex transition from a cash-burning growth entity to a sustainably profitable enterprise. The company’s own presentations lay out a roadmap reliant on three core pillars: lending, its technology platform, and its financial services segment. The heavy lifting is expected to come from significant growth in net interest income and continued scaling of its non-lending revenue streams.
The journey from a GAAP EPS loss of $(0.29) in 2023 to a profit of $0.80 in 2026 is, to put it mildly, a steep climb. Management’s confidence stems from the belief that its financial services “flywheel”—whereby users are acquired for one product and cross-sold into others—will drive down customer acquisition costs and increase lifetime value. However, this model’s efficacy is yet to be proven at the scale required to meet these targets.
| Metric | 2023 (Actual) | 2026 (Management Guidance) | Implied Change |
|---|---|---|---|
| GAAP Net Income | $(301) million | ~$995 million | Substantial Turnaround |
| GAAP Diluted EPS | $(0.29) | $0.75 – $0.80 | Substantial Turnaround |
| Post-2026 Growth Rate | N/A | 20% – 25% | Sustained High Growth |
Source: SoFi Technologies Q1 2024 Earnings Presentation. Net income for 2026 is an estimate derived from EPS guidance and projected share counts.
The Problem with a 35x Multiple
The application of a 35x price-to-earnings (P/E) multiple to a 2026 earnings forecast is perhaps the most speculative part of the bull thesis. While high-growth technology companies can often command such premiums, SoFi’s business model is hybrid. As a bank holding company, it is subject to the credit cycles and regulatory capital requirements of a traditional lender. The market rarely affords traditional banks P/E ratios above the low teens.
While SoFi is certainly not a traditional bank, comparing its potential multiple to fintech peers offers a more sober perspective. Block (SQ), for instance, trades at a forward P/E in the mid-20s. For SoFi to merit a 35x multiple in 2026, it would need to not only meet its $0.80 EPS target but also convince the market that its post-2026 growth of 25% is both durable and of high quality—that is, not overly reliant on extending credit in a late-cycle environment. A sensitivity analysis reveals how dependent the share price target is on this single assumption.
Valuation Sensitivity to PE Multiple (Based on $0.80 EPS)
| Assumed PE Multiple | Implied 2026 Share Price | Commentary |
|---|---|---|
| 20x | $16.00 | In line with mature fintech or high-growth financial services. |
| 25x | $20.00 | A plausible bull-case scenario if growth remains robust. |
| 30x | $24.00 | Requires strong market sentiment and flawless execution. |
| 35x | $28.00 | A rather sporting assumption, pricing in perfection. |
Execution, Credit Risk, and Other Headwinds
Beyond valuation debates, the primary challenge is operational. SoFi’s lending segment, particularly its unsecured personal loans, remains its economic engine. This segment is also its Achilles’ heel. In its Q1 2024 results, the 90-day delinquency rate for personal loans was 0.75%, a figure that, while seemingly low, warrants close monitoring. Any significant deterioration in the credit quality of its borrowers would flow directly to the bottom line, jeopardising the path to its 2026 targets.
Furthermore, the company operates in an intensely competitive market. It vies for deposits and loans not only with banking giants like JPMorgan Chase and Bank of America but also with a host of nimble fintech rivals. The notion that it can sustain a 25% growth rate far into the future assumes it can consistently outmanoeuvre these competitors, a task that becomes harder with scale.
A Final, Speculative Hypothesis
The bull and bear cases for SoFi are clear. The bull case rests on flawless execution and a generous future valuation multiple. The bear case points to cyclical credit risks and the unlikelihood of the market treating a bank like a pure-play technology firm. The path forward is therefore a “show me” story, where the burden of proof lies squarely with management.
A speculative hypothesis is this: SoFi’s long-term valuation will not be unlocked by its lending or financial services segments, but by its technology platform. If management can successfully demonstrate the standalone growth and margin potential of Galileo and Technisys, it could argue for a sum-of-the-parts valuation where the technology arm is valued on a high SaaS multiple, distinct from the banking operations. Should this narrative gain traction, it could provide a pathway to a higher valuation that is less dependent on the unpredictable nature of credit cycles and P/E multiple sentiment. This remains a distant possibility, but it is perhaps the most compelling argument for the kind of valuation bulls currently envision.
References
SoFi Technologies, Inc. (2024, April 29). SoFi Technologies, Inc. Reports First Quarter 2024 Results. Retrieved from https://investors.sofi.com/news/news-details/2024/SoFi-Technologies-Inc.-Reports-First-Quarter-2024-Results/default.aspx
Yahoo Finance. (n.d.). SoFi Technologies, Inc. (SOFI) Stock Price, News, Quote & History. Retrieved from https://finance.yahoo.com/quote/SOFI/
@patientinvestt. (2024, October 4). [$SOFI is guiding $0.80 in EPS for 2026 & 25% growth beyond 2026…]. Retrieved from https://x.com/patientinvestt/status/1845899395780256055
