SoFi Technologies, Inc. (NASDAQ: SOFI) made headlines when it announced that it became the NBA’s official banking partner. At first glance, this looks like just another strategic marketing partnership, especially since SOFI stock investors have seen that before with SoFi stadium. But, it’s much more than that. In fact, it can be the biggest brand initiative SoFi has ever done.
The Partnership
In mid-February, SoFi announced that it had signed a multi-year agreement with the NBA, that saw it become the sports league’s official banking partner, as well as gain the Boston Celtics’ Jayson Tatum as a face for the SoFi brand, similarly to the company’s existing partnership with the NFL’s Los Angeles Chargers’ Justin Herbert.
SoFi bank will also be the official entitlement partner of the SoFi NBA Play-In Tournament, which will take place on the 16th of April and last until the 19th. Additionally, this tournament will have a co-branded SoFi-NBA Play-In Tournament logo designed, which will be used as the official tournament logo, and be promoted throughout the NBA season, during each tournament game and across the NBA’s global social media accounts.
There’s also an incentive for NBA fans to start banking on SoFi, and that is the SoFi Zero Giveaway sweepstakes. Basically, fans who open a SoFi Checking and Savings account will have a chance, each week throughout the NBA regular season and post-season, to add extra zeros to their account via a $10,000 weekly giveaway. Not only that, but SoFi will also partner up with the NBA’s national media partners, Disney (NYSE: DIS) and TNT Sports (NASDAQ: WBD), and will collaborate with the NBA on additional events throughout the year.
While we don’t know exactly how much SoFi paid for this partnership, we could say for certain that it’s likely nothing massive that would put SoFi’s profitability at risk, since SoFi’s main focus as a company right now is to achieve sustainable bottom line profits every single quarter going forward.
SoFi’s Focus on Sports Marketing
We also know the main purpose of the partnership, and it’s to increase SoFi’s user base through sports marketing, which is something that SoFi has been focusing on for a while, and SoFi stadium is the biggest example of that. SoFi stadium is a stadium in Los Angeles that the bank is paying $600 million over 20 years to get the naming rights of that stadium. This means that the bank is spending $30 million per year in marketing expenses, just to get its name out there on that stadium, which increases its presence in the NFL.
The NFL is a pretty big deal in the U.S., in fact, the latest Super Bowl was the most watched event in the country’s history, with an average 123.7 million viewers. Of course, this Super Bowl wasn’t actually played in the SoFi stadium, but the 56th Super Bowl in 2022 was played in SoFi stadium, which makes it very possible that it could come back to SoFi stadium in a couple of years. In addition to that, the opening ceremony of the Olympic games that will be held in the U.S. in 2028 will be in SoFi stadium, as well as some of the 2026 World Cup games and some Copa América games. Therefore, having the naming rights to a stadium in a time when a lot of major sports events are happening will definitely get the people visiting the stadium to watch the game talking about SoFi, and some of them might end up downloading the app. This, in turn, creates a strong brand awareness for SoFi.
In fact, SoFi stadium has already proved its success, as the company’s unaided brand awareness right now is sitting at around 8% or 9%, when in 2018, it was 2%. Comparatively, big competitors to SoFi like JPMorgan (NYSE: JPM) or Wells Fargo (NYSE: WFC) are at around 25%. That’s not everything. If you’ve been following the NFL, you’d know that there was an NFL game streamed on the streaming platform Peacock (NASDAQ: CMCSA), which saw record viewership of 23 million viewers, and this shows that a lot of people are watching this type of games, whether by being physically in the stadium or on T.V. or a streaming service.
This is why SoFi will continue getting into everything related to sports, according to CEO Anthony Noto, who said that the fintech company is doing those deals to get more exposure to people watching the games on their televisions at home. Noto previously worked as a media analyst in Goldman Sachs (NYSE: GS) and had covered the NFL before, and based on that experience, he thinks that SoFi stadium will see four to six prime time NFL games a year, which translates into 20 to 25 million unique viewers per game, giving the bank an extremely large reach to a brand new audience, and at a lower cost than what it was already paying for television ads.
SoFi is also doing more than just owning the naming rights to the stadium, as it also runs ads that explain what the company does and what it stands for during the games held in the stadium, so people would know the company’s name and also what it does. This is how SoFi’s partnership with the NFL works, and for the NBA, it’s the exact same story, as it’ll allow SoFi to reach another large and unduplicated audience, which is around 200 million NBA fans.
Why This is SoFi’s Biggest Partnership
This partnership with the NBA could be SoFi’s biggest partnership ever, which was shown in the latest NBA All-Star Game. If you watched the game, then you’ve probably seen SoFi’s logo all over the field, as well as SoFi’s ads that ran during halftime, and this could actually be the case throughout the entire season.
While the NBA doesn’t have as much viewership as the NFL, it’s a faster sport, which means that it has more highlights that can be posted on social media platforms like TikTok, or Instagram (NASDAQ: META) reels, which increases SoFi’s brand awareness using online virality, especially since the SoFi logo will be obvious during each highlight. You might even say that since the NBA is a more global sport than the NFL, SoFi could be looking at the possibility of expanding outside of the U.S. soon. Maybe with that focus on using sports for marketing, we could see SoFi using a sport like cricket to expand into Asia, or soccer for Europe.
Why SOFI Stock Could Be a Great Investment Opportunity
SoFi’s Exceptional Growth
As of Q4 of 2023, SoFi sits at the 75th place on the list of the largest U.S. commercial banks, and this indicates that there’s still a long road ahead for the company as it wants to earn a place in the top ten. This is made even more obvious when you compare the consolidated assets that SoFi owns, which are valued at around $24 billion, while the tenth place on the list, TD Bank (NYSE: TD), has consolidated assets worth $367 billion. Still, SoFi’s consolidated assets were worth $21 billion in Q3 of 2023, and it was the 80th largest bank back then, so to jump up five ranks and increase assets by $3 billion in just one quarter is an extremely impressive feat, and shows how fast SoFi is growing.
SoFi is also doing really good financially. In Q4, the bank reported a top-line beat, with adjusted net revenues of $594.24 million, a 34% year-over-year growth, and adjusted EBITDA of $181.20 million, a staggering 158.6% year-over-year growth. What’s even better is that the bank has delivered on its promise to generate positive GAAP profitability by Q4 of 2023, with a net income of $47.91 million, a growth of 219.7% from the previous year, and an EPS of $0.02, a 144% year-over-year growth.
Growing User Base
There’s also a big opportunity for the company to have a much larger user base, thanks to its NBA partnership, and this will bring up SoFi’s profits. According to the company’s Q4 results, it managed to bring in 585,000 new members, an increase of 44% year-over-year, bringing the total to 7.5 million members. The member growth has been great for SoFi, which is very obvious just by looking at the chart. But, what’s also obvious is that for the company to bring in new members, it needs to spend money on marketing.
You can easily calculate just how much SoFi spends on marketing by looking at the company’s sales and marketing costs on its Q4 income statement, which were around $174 million. If you divide that by the numbers of the new members acquired in the same quarter, and you’d get a number around $290 of marketing costs per every new member in the quarter, and if you do the same thing for the full year, it’d be around $310 per member.
This is quite high, especially when looking at the industry average of $200, and some banks even have much lower costs of acquiring new members than that. In other words, yes, the company is growing really fast, but it’s spending a lot more than its competitors to do that. But, this can be brushed aside by saying that spending so much at the beginning is necessary for SoFi to get its name out there, especially since it no longer competes with other fintech startups, but with established traditional banks. Eventually, the company might not have to spend that much money, as its growing user base will start doing the marketing for it via word of mouth.
Increasing Institutional Ownership in SOFI Stock
Another reason to be bullish on SOFI stock is the increasing institutional ownership in the company. For example, SOFI stock saw a significant buy from Ark Invest in February, with over 2.8 million shares purchased, and this was more than double the investment management firm’s position in SOFI stock in just one day.
Also, Ken Griffin’s Citadel Advisors boosted its existing SoFi stake by 632%, picking up 3.92 million shares. These two are old institutional investors in SOFI stock, but there are also new names coming in. For example, Paul Tudor Jones’ Tudor Investments bought around 481,000 shares, which is a very small percentage of Tudor’s portfolio, but it shows that SOFI stock is receiving strong attention from big names in the investing world.
With all of this in mind, 2024 and beyond look like they could be great years for SoFi, thanks to the amount of big sports events happening soon. Meaning, now might be a great time to buy shares of SOFI stock, especially since one share is trading at around $7.26.
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