SoFi vs. Affirm: Which Fintech Stock is a Better Buy?

: SOFI | SoFi Technologies Inc. News, Ratings, and Charts

SOFI – Today I will analyze and compare SoFi Technologies, Inc. (SOFI) and Affirm Holdings, Inc. (AFRM) to determine which fintech stock is a better buy,.

Fintech companies are changing the traditional financial sector by integrating technological innovation into traditional financial products. The further advancement in Big Data, artificial intelligence (AI), and machine learning should enable the fintech industry to reach $ $324 billion by 2026, growing at a CAGR of 23.4%

However, the increasing industry regulations and industry-wide challenges has caused the fintech stocks to pull back from their November 2021 highs, as evidenced by the 32% decrease in the Global X FinTech Thematic ETF (FINX) over the past three months.  Therefore, for contrarian investors, now could be a good time to scoop up shares in fintech stocks.

In today’s article, I will analyze and compare two promising fintech stocks: SoFi Technologies, Inc. (SOFI) and Affirm Holdings, Inc. (AFRM). Based in San Francisco, SoFi Technologies, Inc. operates as a fintech company that offers various financial services. In addition to cryptocurrency trading, SoFi provides different types of loans, investments, and insurance services. Affirm, founded in 2012, is a financial technology company that offers a state-of-the-art “buy now, pay later” lending platform for e-commerce transactions. 

Over the past three months, shares of SOFI are down 25%, while AFRM stock has dropped 54% over the same period.

Recent Developments 

On January 19th, SOFI stock skyrocketed over 18% during the pre-market trading session after it had received bank charter approval. The Office of the Comptroller of the Currency and the Federal Reserve has approved Sofi’s applications to become a national bank through its acquisition of Golden Pacific Bancorp, Inc. Under the new terms, SoFi Technologies will become the parent company of SoFi Bank. This news provides SoFi with enormous benefits, which can positively affect its top and bottom line in the coming quarters. 

On December 16th, The Consumer Financial Protection Bureau issued several orders to five “Buy Now, Pay Later” (BNPL) companies to collect more data about the risks and benefits of BNPL credit. AFRM came to the list, along with other BNPL providers, amid regulators’ worries about accumulating debt, regulatory arbitrage, and data harvesting on the BNPL market. This announcement, coupled with increasing competition and valuation concerns, caused AFRM stock to lose about 35% of its value since then. 

Financial‌ ‌Overview‌ ‌&‌ ‌Analysts‌’ ‌Estimates‌ ‌

SoFi Technologies’ total revenues for its third quarter of 2021 increased 35.5% year-over-year to $272.01 million, topping analysts’ estimates by $16.38 million. The company experienced growth across all its key segments. For instance, revenues from its lending segment were up 30% YoY to $210.29 million, while its technology platform segment sales grew 29% YoY to $50.23 million. SoFi’s financial services segment showed the highest growth rate, with net revenue of $12.62 million. 

Besides, the company reported a Non-GAAP Q3 bottom line of ($0.05), beating analysts’ consensus by $0.09. It is also important to note that SoFi demonstrated the fifth consecutive quarter of positive adjusted EBITDA of $10.26 million. Finally, the fintech also grew its customer base, expanding by 96% year-over-year to 2.9 million. 

The company’s EPS is expected to stand at ($0.08) in the current quarter. Analysts expect SoFi’s revenue to come in at $284.29 million in the fourth quarter of 2021.

On November 10th, Affirm Holdings issued an earnings report for the first fiscal quarter of 2022. In FQ1, its total revenue increased 54.8% year-over-year to $269.39 million. Strong revenue growth in its interest income segment supported AFRM in beating the revenue consensus estimates by $20.03 million. However, AFRM’s GAAP EPS was ($1.13), missing expectations by $0.74. 

Affirm’s gross merchandise volume stood 84% higher year-over-year at $2.7 billion. Besides, transactions per active user experienced improvement by 8% to 2.3 as of September 30th, 2021.

For the second fiscal quarter of 2022, analysts project Affirm’s EPS to be ($0.20), representing a 49.57% year-over-year increase. Besides, analysts expect that AFRM’s revenues for the current quarter should grow by 63.41% to $333.42 million. 

Comparative Valuation 

In terms of TTM Price/Sales, AFRM is currently trading at 13.99x, which is 185.5% higher than SOFI, whose multiple presently is 4.90x. When it comes to the TTM Price/Book multiple, AFRM’s P/B multiple of 7.51x also exceeds SOFI’s multiple of 2.60x. 

What is more, SOFI has a better gross profit margin TTM of 72.25% compared to Affirm’s 50.54%. Its gross profit margin is also above the sector’s median of 62.72%

The Bottom Line 

I believe that SOFI is a better pick than AFRM at these levels. The recent bank chapter approval could act as a solid growth catalyst for SOFI stock. Moreover, the company delivered a solid third-quarter report, beating analysts’ consensus. At the same time, the increasing BNPL regulations and tough competition could restrict AFRM’s stock growth. Finally, SOFI looks relatively cheaper from the valuation standpoint and has a better margins profile.


SOFI shares were trading at $15.64 per share on Thursday morning, up $1.93 (+14.08%). Year-to-date, SOFI has declined -1.08%, versus a -3.65% rise in the benchmark S&P 500 index during the same period.


About the Author: Oleksandr Pylypenko


Oleksandr Pylypenko has more than 5 years of experience as an investment analyst and financial journalist. He has previously been a contributing writer for Seeking Alpha, Talks Market, and Market Realist. More...


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