Down 20%, Can SoFi Stock Make a Comeback in 2024?

The last few years have been rough for SoFi Technologies (NASDAQ: SOFI) investors. 2024 isn't going much better. The financial technology (fintech) and online banking upstart is down around 20% year to date while the S&P 500 index soars in the U.S. Index holders have appreciated a 60% total return level since SoFi went public while SoFi stock is down around 29%.

However, if you look at SoFi's underlying business, it continues to grow quickly and is finally turning a profit. Does that make the stock a comeback candidate for the rest of 2024?

8 million members and a fast-growing deposit base

SoFi has aggressively attracted customers since gaining a banking license a few years back. It offers sky-high yields on its savings accounts -- 4.6% APY as of this writing -- much higher than the big banks in the U.S. This has helped the company grow from slightly over 1 million total customers in the first quarter of 2020 to 8 million in Q1 of 2024. An eightfold increase in just a few years is an astounding growth rate and makes SoFi one of (if not the fastest-growing) online bank in the U.S.

Deposits, the lifeblood of a bank, are growing quickly as well. The more deposits SoFi takes on the balance sheet, the more loans it can make. And the more loans it makes, the more profits it can generate (as long as the loans are underwritten profitably). Last quarter alone, SoFi added around $3 billion in new deposits to its balance sheet, which helped it refinance and lower its debt obligations. Total debt fell to $2.89 billion in Q1 compared to $5.2 billion at the end of last year. As deposits grow, SoFi will likely be able to further bring down its debt obligations and clean up the balance sheet.

Scaling up these banking operations has helped SoFi achieve profitability. Last quarter it generated $88 million in net income compared to a $34 million net loss in the first quarter of 2023. In the first quarter of 2021, the company lost a whopping $177 million on just $196 million in total revenue. For all of 2024, SoFi is expecting to generate $165 million-$175 million in net income. This is major progress on the profitability front in just a few short years.

SOFI Total Return Level data by YCharts

More than just an online consumer bank

SoFi is not just a consumer bank. It owns a fintech subsidiary called Galileo that helps other financial institutions accept deposits, issue credit and debit cards, and provide customer analytics. Essentially, it is outsourcing a lot of the functionality it has built as a modern banking institution.

Galileo now has 151 million active accounts across the variety of businesses it works with. It generated $352 million in revenue last year and management is guiding for 20% revenue growth in 2024. As a high-margin software business, Galileo can help SoFi diversify its operations and drive even more profit growth in the coming years.

This is not just an online bank, but an online bank with a fintech subsidiary generating hundreds of millions in sales every year.

The stock is down, but is it cheap?

As of this writing, SoFi has a market cap of around $8 billion. Compared to its full-year guidance of $175 million in net income , the stock does not look cheap with a forward price-to-earnings ratio of 46. However, investors should remember that SoFi is still trying to market for growth and is passing up on profits today in order to be a larger business tomorrow.

It could easily bring down interest rates and marketing spend to generate a high level of net income in 2024. However, the company believes -- and has shown for years -- that there is a huge runway to grow deposits as a modern online bank in the U.S. It still makes up just a fraction of the consumer banking market with $20 billion in deposits. I wouldn't be surprised to see it hit $100 billion in deposits within five to 10 years.

Don't forget the Galileo subsidiary, either. With high margins, this can drive a ton of value for SoFi investors in the coming years if it keeps growing revenue at a double-digit rate.

The stock may remain volatile due to the inconsistent profits today, but SoFi stock looks cheap if you believe it can keep growing deposits. For that reason alone, the stock may be a great buy for investors for the second half of 2024 and beyond.

Brett Schafer has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy .