Upstart vs. SoFi Technologies: Which Fintech Stock Will Dominate in 2025?
Fintech's heavyweights are duking it out—but only one can wear the crown.
Upstart: The AI-powered lending disruptor cutting banks out of the equation. SoFi: The all-in-one financial supermarket betting on cross-selling millennials their first mortgages.
The bullish case for Upstart: When algorithms replace loan officers, margins explode. The bear trap? A single recession could torch its unproven underwriting model.
SoFi's play: Become the Amazon of finance—until regulators remember they hate monopolies. Student loan refinancing was its golden goose… until the government slammed that door shut.
Final verdict: One stock's innovating, the other's desperately cross-selling. Choose wisely—Wall Street's patience lasts exactly one earnings miss.
(Bonus jab: Remember when both companies promised profitability 'next quarter'… in 2022?)
Image source: Getty Images.
Upstart's growth is warming up again
Upstart's platform approves loans for banks, credit unions, and auto dealerships. Instead of reviewing traditional data like an applicant's score, credit history, or annual income, it uses its AI algorithms to analyze non-traditional data points -- which can include previous jobs, standardized test scores, and GPA -- to approve a broader range of loans for younger and lower-income applicants with limited credit histories. It fully automates most of those approvals.
Upstart's growth can be measured through its originated loans, conversion rate (the ratio of total inquiries leading to approved loans), and contribution margin (the ratio of its fees it retains as revenue). Here's how it fared over the past five years.
|
Originated loans growth |
40% |
338% |
(5%) |
(59%) |
28% |
|
Conversion rate |
15% |
24% |
14% |
10% |
16.5% |
|
Contribution margin |
46% |
50% |
49% |
63% |
60% |
|
Revenue growth |
42% |
264% |
(1%) |
(39%) |
24% |
Data source: Upstart.
In 2022 and 2023, Upstart's growth decelerated as soaring rates chilled the market's demand for new loans. Many lenders also cautiously reined in their own offerings. But as Upstart's top-line growth slowed down, its contribution margin improved as it automated more loans and locked in a higher mix of "super prime" borrowers to boost its take rate for each loan.
In 2024, its growth accelerated again as interest rates declined. From 2024 to 2027, analysts expect its revenue and adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) to grow at a CAGR of 36% and 245%, respectively. Those are robust growth rates for a stock that trades at just 22 times next year's adjusted EBITDA.
SoFi's growth is still cooling off
SoFi provides a wide range of loans, insurance policies, estate planning services, credit cards, banking services, and stock trading tools. It obtained a U.S. bank charter in 2022, and it operates as a digital-only direct bank that doesn't run any brick-and-mortar branches.
That streamlined approach enabled SoFi to expand at a much faster rate than traditional banks, as seen in its growth in members, total financial products in use, and total revenue over the past four years. Its adjusted EBITDA margin also expanded from 3% in 2021 to 26% in 2024.
|
Members |
2.5 million |
5.2 million |
7.5 million |
10.1 million |
|
Products in use |
1.9 million |
7.9 million |
11.1 million |
14.7 million |
|
Revenue growth |
74% |
60% |
35% |
26% |
Data source: SoFi Technologies.
However, the temporary suspension of student loan payments from 2020 to 2023, rising interest rates, and other macro headwinds throttled SoFi's growth. It also faces tougher competition from "neobanks" likeand, dedicated lending platforms like Upstart, and expanding fintech giants like.
On the bright side, two of those headwinds are dissipating. The freeze on SoFi's student loan payments has ended, and interest rates will likely keep declining. From 2024 to 2027, analysts expect SoFi's revenue and adjusted EBITDA to grow at a CAGR of 25% and 37%, respectively.
That bright outlook implies that while SoFi's hypergrowth days might be over, it should continue to grow at an impressive rate as it gains even more members, expands its ecosystem with fresh features, and profits from the expansion of its fintech subsidiary Galileo, which it acquired in 2020 and now serves nearly 160 million accounts on its own. Like Upstart, SoFi's stock also looks cheap relative to its growth potential at 19 times next year's adjusted EBITDA.
The winner: Upstart
Upstart and SoFi are both promising fintech stocks. But if I had to choose one over the other, I'd buy Upstart because it's growing faster, experiencing accelerating growth (instead of just stabilizing growth), and faces fewer direct competitors. SoFi still has to prove it can maintain its edge against its growing list of competitors.
