SoFi Technologies Tumbles On Q1 Earnings, But Bullish Analyst Says 'Momentum Continues'

SoFi Technologies Inc SOFI shares tumbled 11% on Monday after the company reported what many investors believed were impressive first-quarter numbers and raised its guidance for fiscal 2023. SoFi investors are likely puzzled by the stock's negative reaction to the earnings report, but one analyst said Monday that traders shouldn't be discouraged by the post-earnings sell-off.

The Analyst: Bank of America analyst Mihir Bhatia reiterated his Buy rating and $8 price target for SoFi.

Related Link: SoFi Technologies Beats On Q1, Boosts 2023 Guidance

The Thesis: In his new note to clients, Bhatia said SoFi continues to demonstrate strong momentum in its core business, including strong Lending segment performance, and impressive membership and deposit growth. Membership was up 46% year-over-year in the first quarter, while deposits were up 37% on a quarterly basis.

SoFi also adjusted the midpoints of its fiscal 2023 revenues and EBITDA guidance ranges upward by $25 million and $8 million, respectively.

Given all the impressive numbers, why are SoFi shares selling off?

"The lack of a more meaningful guidance raise likely disappointed some investors," Bhatia said.

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In addition, he said whole loan sales fell short of expectations in the first quarter.

"Investors have been picking at SOFI’s ability to sell loans and its gain on sale revenue recognition, so the lack of whole loan sales could remain a topic of investor angst," Bhatia said.

However, he noted that the seemingly conservative guidance has set a low bar for the company in the full fiscal year, and he anticipates the company's loans on its balance sheet will continue to grow in the near term.

Benzinga's Take: Even after Monday's sell-off, SoFi shares are up 26% year-to-date, so it's hard to rule out simple profit-taking as well. Overall, SoFi has been a huge disappointment for investors, and the stock remains down roughly 75% since it completed its SPAC merger back in June 2021.

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