SoFi vs. Upstart: Which Personal Loans Stock Is a Better Buy?

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

SOFI – Shares of personal loan companies SoFi (SOFI) and Upstart (UPST) have experienced impressive gains in 2021. Today I’ll take a look to see the key business segments of the companies and analyze which is a better investment at current valuations.

Fintech companies have been on an absolute tear since the onset of COVID-19. The ongoing pandemic has accelerated the digital transformation processes of enterprises and businesses at the global level which has increased demand for a multitude of fintech products and services.

This macro-economic tailwind suggests stocks such as SoFi (SOFI) and Upstart (UPST) should be part of your watchlist today. SoFi Technologies is valued at a market cap of $17.49 billion and Upstart is valued at $18.35 billion.

Both the companies are growing at a rapid clip, making them interesting investments to consider for long-term growth investors. But which stock is a better buy today?

The bull case for SoFi Technologies

SoFi Technologies offers a wide range of financial services that includes an online brokerage platform, credit cards, cash management, and lending. Its SoFi Lantern solution allows you to compare lending products and its expanding portfolio of products has allowed the company to increase sales from $269.9 million in 2018 to $565 million in 2020.

In Q3 of 2021, SoFi reported revenue of $272 million and a loss of $0.05 per share. SoFi now expects total sales to rise over $1 billion in 2021 while adjusted EBITDA is forecast at $31 million.

SoFi derives a significant portion of its sales from the lending business which originates student loans, personal loans, and even mortgages. Sales from this segment were up more than 25% year over year at $210 million. The company in fact originated over $3.4 billion in total loan volume with personal loan originations totaling $1.6 billion in Q3.

In the quarter ended this September, Sofi acquired 377,000 new customers taking its total count to almost three million.

SoFi’s sales are forecast to touch $1.47 billion in 2022 while its loss per share is expected to narrow to $0.28 next year from a loss of $1.14 per share in 2021.

The bull case for Upstart

Upstart provides a cloud-based artificial intelligence platform for banks and financial institutions. UPST stock is now down almost 40% from record highs, allowing you to buy the dip. Despite the recent pullback, Upstart stock has risen close to 700% since its IPO in late 2020.

Upstart generates sales by providing a loan origination service for banks that pay the company a fee. So, Upstart does not have any exposure to loan defaults enabling it to scale its business at a robust pace. In fact, Upstart claims its AI platform has reduced the number of loan defaults by as much as 75% for the same number of loan approvals when compared to traditional credit risk assessment methods.

While Upstart primarily originates unsecured loans in the personal loan and vacation loan verticals, the company is looking to enter the automobile segment with the acquisition of Prodigy which is a car dealership software firm.

Upstart sales are forecast to touch $1.14 billion, up from just $55.97 million in 2017. Its adjusted earnings per share are also expected to touch $2.31 in 2022, compared to $0.23 in 2020.

The verdict

I believe Upstart is currently a better investment than SoFi Technologies.  That’s because Upstart has widening profit margins and higher growth rates. Upstart is also entering new business verticals which will allow the firm to grow top-line at a solid pace in the future.


SOFI shares rose $0.19 (+0.90%) in premarket trading Thursday. Year-to-date, SOFI has gained 71.22%, versus a 26.73% rise in the benchmark S&P 500 index during the same period.


About the Author: Aditya Raghunath


Aditya Raghunath is a financial journalist who writes about business, public equities, and personal finance. His work has been published on several digital platforms in the U.S. and Canada, including The Motley Fool, Finscreener, and Market Realist. More...


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