Shares of SoFi Technologies, Inc. (SOFI Quick QuoteSOFI - Free Report) have declined 24% year to date compared with the industry’s 16% decline.

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This sharp downturn raises the question: Does this present a compelling buy-the-dip opportunity, or should investors exercise caution? Let’s find out.

SoFi’s Strong Business Model

SoFi’s land-and-expand strategy remains a core strength, provided it is effectively managed. The company has a strong track record of executing this ambitious growth approach. By offering a diverse range of financial services, SoFi attracts a growing customer base. This, in turn, incentivizes more partners to integrate their offerings within SoFi’s expanding ecosystem. The result is a robust cross-selling dynamic that enhances overall profitability.

Given this, it is unsurprising that management maintains an aggressive revenue growth outlook for 2025. SOFI’s increasing ability to cross-sell financial products is expected to drive significant EPS expansion, which is crucial for long-term shareholder value creation. Even in a conservative scenario, management projects a 23% revenue increase, with EPS surging 67%. This substantial discrepancy between revenue growth and bottom-line expansion underscores SoFi’s ability to leverage economies of scale.

SOFI’s Commitment to Ecosystem Expansion

SoFi’s management remains focused on broadening its suite of financial services. In the fourth quarter of 2024, the company introduced several initiatives, including credit cards, alternative investments, and the subscription-based SoFi Plus. Additionally, SoFi may strengthen its cryptocurrency exposure by adding costing and clearing services, asset-backed lending, and other crypto-related financial products. This strategic move is particularly relevant in the current regulatory climate, as President Trump has expressed ambitions to position the United States as the world’s crypto capital.

Galileo’s Long-Term Growth Potential

Galileo, SoFi’s B2B financial services platform, is a pivotal growth driver. By enabling seamless payment and lending integrations, it positions SoFi as a leading player in the embedded finance market. This sector is projected to grow at a robust 21.3% CAGR through 2033, fueled by increasing demand for integrated financial solutions. Galileo's ability to attract high-profile clients and diversify SoFi’s revenue streams strengthens the company's long-term outlook. The platform’s adoption by other financial firms further solidifies SoFi’s market position and enhances its ability to capture additional market share.

SOFI’s Strong Financial Performance

SoFi’s financials reinforce its bullish long-term thesis. In the fourth quarter of 2024, the company achieved a 19% year-over-year increase in net sales, with a remarkable 594% surge in net income. This impressive profitability growth highlights SoFi’s strong operating leverage, driven by its ability to scale efficiently. The addition of 785,000 new members in the quarter — the highest absolute increase recorded — enhances the company’s cross-selling potential while reducing customer acquisition costs.

All three business segments contributed to revenue growth in the fourth quarter. Lending and Technology Platform revenues grew 18% and 6% year over year, respectively, while the Financial Services segment surged an impressive 84%.

The Zacks Consensus Estimate for SOFI’s 2025 earnings stands at 25 cents per share, reflecting a substantial 66.7% year-over-year increase.

Image Source: Zacks Investment Research

Similarly, projected revenues for 2025 are estimated at $3.2 billion, marking a 23% increase from the previous year.

Image Source: Zacks Investment Research

Challenges and Risks

Despite its strong fundamentals, SoFi faces notable challenges. As a financial services company, its performance is highly sensitive to macroeconomic conditions, particularly Federal Reserve policy and broader economic health. With the potential for prolonged high interest rates and the risk of a recession due to Trump’s proposed tariff hikes, the economic environment remains uncertain.

Competition is another critical factor. SoFi enjoys a first-mover advantage in the U.S. fintech space, but it faces intense rivalry from traditional banking giants like JPMorgan (JPM Quick QuoteJPM - Free Report) and Bank of America (BAC Quick QuoteBAC - Free Report) . Additionally, aggressive fintech challengers like Revolut are expanding their footprint, with Revolut planning to secure a U.S. banking license.

Valuation Concerns

While SoFi’s stock has pulled back in recent months, it still appears overvalued relative to its peers. The forward 12-month Price/Earnings ratio stands at 36.11, significantly above the industry average of 14.6. This suggests that even after the decline, investors are pricing in substantial future growth. However, such a premium valuation raises downside risk if SoFi fails to meet elevated expectations.

Hold SOFI Amid Market Volatility

Given SoFi’s strong growth trajectory, expanding ecosystem, and improving financial performance, the long-term investment case remains compelling. However, considering macroeconomic uncertainties and the stock’s relatively high valuation, a prudent approach would be to adopt a hold strategy at current levels. Investors may consider waiting for further price corrections before adding positions, ensuring a more attractive entry point while mitigating downside risks. A wait-and-watch approach will allow investors to reassess valuation levels and economic conditions before making new commitments to the stock.

SOFI currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.