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The Stock of Sofi Rockets as Earnings Blow Past Expectations

January 29, 2024
minute read

SoFi Technologies Inc. witnessed a substantial surge in its shares during morning trading on Monday, propelled by robust lending volumes that translated into profitability surpassing expectations for the latest quarter in the realm of financial technology.

As the markets opened on Monday, SoFi's stock (ticker: SOFI) soared by 21.8%, poised to achieve its most significant single-day percentage gain since August 3, 2022, when it experienced an explosive 28.4% increase. Notably, the last comparable rally occurred on July 31, 2023, with a surge of 19.9%.

The fourth quarter marked a significant milestone for SoFi, as the company reported its inaugural quarterly profit based on generally accepted accounting principles (GAAP). SoFi disclosed a net income of $48 million, equivalent to 2 cents per share, in the fourth quarter, a stark contrast to the loss of $40 million, or 5 cents per share, incurred in the corresponding period of the previous year. Analysts, as per FactSet projections, had anticipated the company to break even on a per-share basis.

SoFi also revealed adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) of $181 million for the fourth quarter, a substantial increase from the $70 million recorded in the same period the year before. The FactSet consensus had pegged this figure at $142 million.

Total net revenue for the quarter reached $615 million, showcasing a 35% uptick from the preceding year, surpassing analyst expectations of $575 million.

Origination volumes for personal loans experienced a notable 31% increase in the fourth quarter, while volumes for student loans and home loans surged by 95% and 193%, respectively.

During the same period, SoFi observed a 19% growth in deposits, reaching a total of $18.6 billion. The company's CEO, Anthony Noto, attributed this deposit growth to the acquisition of high-quality deposits, resulting in a more favorable cost of funding for the loans.

SoFi underscored that its investment products, excluding cryptocurrency, registered a 20% growth from the previous year. The company expressed optimism about expanding its offerings by introducing alternative investments and mutual funds. Noto, during the earnings call, stated, "With the launch of alts, SoFi is granting yet another opportunity for everyday investors to access investment opportunities traditionally reserved for institutional investors and the ultra-wealthy."

Looking ahead, SoFi provided guidance for the first quarter, anticipating adjusted net revenue between $550 million and $560 million, along with adjusted EBITDA ranging from $110 million to $120 million. Analysts, however, had predicted $578 million in adjusted net revenue and $125 million in adjusted EBITDA.

Management expressed confidence in maintaining profitability on a GAAP basis into the first quarter, forecasting a GAAP net income of $10 million to $20 million, compared to the FactSet consensus of $8 million.

For the entire year, SoFi expects GAAP earnings per share to be in the range of 7 cents to 8 cents, exceeding analysts' earlier projections of 5 cents. Additionally, the company introduced a 2026 forecast, envisioning GAAP earnings per share between 55 cents and 80 cents.

Jefferies analyst John Hecht commented on SoFi's performance, noting that the fiscal 2024 guidance and long-term guidance reflect sustained growth across all business segments. He emphasized that SoFi continues to navigate adeptly in a somewhat challenging environment given the macroeconomic and interest rate conditions.

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