SoFi Plunged 10% Following Its Earnings. Here Are 3 Things Investors Need to Know.


The fintech offered a mixed outlook following its first-quarter earnings announcement.

On Monday, SoFi (SOFI 1.01%) reported earnings, beating analysts’ estimates and raising its annual earnings guidance. However, that didn’t stop the stock from falling over 10% after its announcement. The fintech’s quarterly growth was solid, but there were concerns about the slowing growth rate along with a disappointing forecast for the second quarter. Here what investors need to know about SoFi today.

1. SoFi turned in its second consecutive profitable quarter

In the first quarter, SoFi’s total revenue grew 27% to $645 million, while its net income of $88 million represented its second consecutive profitable quarter. The company brought in a net income of $48 million in the fourth quarter.

The company saw slow growth from its lending segment, where total revenue fell 2%. However, it did get a strong boost from its technology platform and financial services segment. Its technology segment, which provides back-end banking infrastructure for fintechs and neobanks, has become an increasingly important part of the business. This segment’s revenue was up 21% to $94 million, while its contribution profit more than doubled from last year.

In financial services, SoFi saw strong net interest income growth, which doubled from last year to nearly $120 million. In comparison, its contribution profit of $37 million drastically improved from last year’s $24 million segment loss.

2. SoFi continues to grow across key customer segments

One thing that helped drive SoFi’s strong financial services growth is its growing customer base. Its member count grew to 8.1 million in the quarter, or 44% compared to last year. Deposits also increased by 16% as customers were drawn to its SoFi Money offering, thanks to its 4.6% annual percentage yield. The company expects to add 2.3 million new members during the year, representing 30% growth.

A chart shows SoFi's quarterly member growth over the past four years.

Image source: SoFi.

It also saw its technology platform accounts grow by 20% to 151 million accounts. CEO Anthony Noto told investors, “Our consistent product development and successful shift in sales strategy has enabled us to diversify growth and pursue larger, more durable revenue opportunities.”

The company sees its technology platform as an opportunity to become a steady source of revenue thanks to its long-term contracts and the potential to become the “Amazon Web Services of fintech,” and its growth in customer count and earnings shows how far the company has come.

3. SoFi offered a mixed outlook for the next few quarters

Credit quality weakness and a slowing growth rate were two themes of SoFi’s earnings in the quarter, and why the company called 2024 a “transition year.” The company expects lending revenue to decline 5% to 8% during the year as it takes “a more conservative approach in light of macroeconomic uncertainty.”

Another area that likely disappointed investors was its second-quarter revenue forecast of $555 million to $565 million, below analysts’ consensus estimates of $580.

Despite a slower second quarter, SoFi expects solid growth across its technology and financial services segment, projecting revenue growth of 20% and 75% from the two segments, respectively. It also raised its guidance for full-year revenue by $25 million and GAAP net income by $70 million.

Should you buy the dip?

Following the sell-off, SoFi stock is priced around two times its tangible book value and 3 times sales, both on the low end since it went public.

SOFI Price to Tangible Book Value Chart

SOFI Price to Tangible Book Value data by YCharts

Compared to bank stocks, SoFi is expensive. However, the company continues steadily growing its deposit base and net interest income faster than traditional banks. Not only that, but its technology and financial services offerings are becoming more integral to its business and help diversify its earnings away from its legacy lending business.

While SoFi’s higher valuation leaves it vulnerable to more volatility, I think the stock’s recent sell-off is a good opportunity for patient investors to scoop up shares today.

John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Courtney Carlsen has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Amazon. The Motley Fool has a disclosure policy.



Source link

About The Author

Scroll to Top