SoFi Technologies Stock: Time to Get in For Pre-Earnings Run?

SoFi Technologies Inc. SOFI is a financial technology (fintech) services company that offers products and services to help consumers better manage their money. The company began as a student loan provider and expanded its services to include a broader range of loans, banking and investment services, and cryptocurrency trading.

SoFi Technology operates in the business services sector, competing with financial services companies like Bank of America Inc. BAC, Wells Fargo and Co. WFC, and Upstart Holdings Inc. UPST.

Harnessing Generational Customers Starting in College  a One-Stop Shop

SoFi understands the value of generational customers and that it pays to capture consumers while they are training for or just starting their careers. In this era of digital nomads who tend to stray away from conventional banks, SoFi caters to millennials and Gen-Z-ers. The company appeals to the younger demographic, who are more comfortable with digital banking, user-friendly online platforms, and mobile apps that provide financial education resources.

Growing Its Portfolio of Products and Harnessing the Network Effect

 SoFi’s services are vertically integrated, with cross-selling opportunities embedded into all of its products. As students graduate and progress with their careers, SoFi provides student loan refinancing and consolidation, credit cards, banking, personal loans, mortgages, and investment services. SoFi tries to be a one-stop shop for all financial services that are easily accessed through a mobile app. As customers become familiar with some of its products, they migrate to more products. SoFi has seen direct deposits grow to support this. Total products grew 38% in Q1 2024 to over 11.9 million. These are the number of products its membership uses, which continues to expand.

SoFi Attempts a Falling Wedge Breakout

The daily candlestick chart on SoFi illustrates a falling wedge breakout reversal pattern. A falling wedge has converging upper and lower trendlines representing lower highs and lower lows as the channel gets narrower. As SoFi nears the apex, shares break through the upper trendline at $6.61. The daily relative strength index (RSI) bounced up to the 60-band. Pullback support levels are at $6.61, $6.15, $5.58, and $5.10.

SoFi's Solid Q1 2024 Earnings and Increased Membership

SoFi reported Q1 2024 EPS of 2 cents, beating consensus estimates by a penny. Revenues rose 26.2% YoY to $580.6 million versus $555.27 million. The Lending segment contribution profit fell 1% to $209.9 million. Contribution margin using Lending adjusted net revenue decreased by 64% from 65% to capitalize on robust demand for its lending products. Personal loan originations rose 11% YoY to $3.3 billion. Student loan volume grew 43% YoY to $752 million. Home loan volume rose 274% YoY to $336 million.

SoFi grew its membership and products by over 35% year over year. The company added 622,000 new members to 8.1 million, up 2.5 million members and 44% year over year. Members added over 989,000 products in the quarter, for a total of 11.8 million products used by members, up 38% YoY.

SoFi’s Financial Services is in Hypergrowth

Financial services saw total products increase by 42% YoY to 10.1 million, up from 7.1 million in the year-ago period. SoFi Money, which includes checking, savings and cash management accounts) grew 61% YoY to 3.9 million products. SoFi Relay grew 64% YoY to 3.6 million products. SoFi Invest grew 1% YoY to 2.2 million products. Lending products grew 20% YoY to 1.7 million, driven by personal loans and steady student loan growth. Its Technology Platform enabled accounts rose 20% YoY to 151 million.

SoFi Issues Mixed Guidance

SoFi issued downside revenue guidance for Q2 2024 of $555 million to $565 million versus $580.78 million consensus estimates. Adjusted EBITDA is expected to be between $115 million and $125 million, and the net come of $5 million to $10 million.

SoFi raised full-year 2024 revenue guidance of $2.39 billion to $2.43 billion, up from $2.365 billion to $2.43 billion, versus $2.38 billion consensus estimates. GAAP EPS is expected between 8 cents and 9 cents, versus prior guidance of 7 cents to 8 cents. The technology platform and Financial Services segments are expected to drive growth, increasing from 38% to 50% of total adjusted net revenue growth in 2024.

Enabling People to Borrow, Spend, Save, Invest, and Protect Their Money

SoFi CEO Anthony Noto was upbeat, underscoring the exceptional first quarter of 2024 results. Noto labeled 2024 as a year of transition. Interest rate volatility, industry liquidity, inflation, and macroeconomic concerns prompted a conservative outlook. However, the company generated $88 million in GAAP net income, continuing its GAAP profitability streak for a second consecutive quarter. Noto pointed out that its broad product offering enables people to borrow, save, spend, invest, and protect their money.

Noto commented, “This increasingly diverse product relationship with our members is what maximizes the power of the financial services productivity loop and allows us to leverage our unique structural economic advantage. Despite external unpredictability in the year ahead, I remain as confident as ever in SoFi's future, our plans to sustain responsible growth, and our ability to deliver meaningful value to our shareholders.”

SoFi Technologies analyst ratings and price targets are at MarketBeat. The consensus analyst price target of $9.29 implies a 33.3% upside. Out of 17 analyst ratings on SoFi stock, five have a Buy Rating, 10 have a Hold rating, and two have a Sell rating.  

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