The market doesn’t like SoFi’s accidentally leaked earnings results. Is it a purchase?

First quarter earnings results for comprehensive financial services provider SoFi Technologies (SOFI -12.06%) were accidentally leaked earlier today, causing the stock to drop more than 18% before trading was halted.

SoFi reported a net loss per share of $0.14 on total revenue of approximately $330.4 million. Earnings were in line with estimates, while revenues easily outperformed.

Image source: Getty Images.

In the quarter, the company added more than 400,000 members and increased its total membership to 3.87 million. It also added another 10 million accounts to its Galileo technology platform. SoFi’s loan segment revenues came in at $252 million and the division had contribution income of $132.7 million, both the highest each had ever generated.

Its lending division generated more than $2 billion in personal loan originations, while student loan originations of $984 million fell significantly from the previous quarter, largely due to the extension of the loan moratorium for students.

SoFi’s technology and financial services segments also generated record revenue, although their contribution earnings were down from the previous quarter.

In financial services, the company added 212,000 new SoFi Invest accounts, which is its online brokerage, and 188,000 SoFi Money account users, which relates to its deposit account. Now that it’s a bank, SoFi has added to its balance sheet the $1.2 billion in deposits it was likely storing at other banks.

The company also provided guidance for the second quarter and full year of 2022. It expects to generate adjusted net income of $322 million and adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) between $5 million and $15 million.

For the full year, SoFi expects adjusted net income of approximately $1.51 billion, which is a slight increase from the company’s prior full-year revenue forecast. Adjusted EBITDA guidance between $100 million and $105 million is essentially flat from the previous initial guidance of $100 million.

Investors appear to have initially sold the stock because the second-quarter earnings forecast was lower than analysts had projected. Full-year adjusted EBITDA is also below analyst estimates of $119 million, according to Bloomberg.

In my opinion, this initial liquidation seems exaggerated based on this leaked data. SoFi is still growing well and far outperformed revenue guidance, despite the slowdown in student loan activity, which was offset by a nice rise in personal loans. While the student loan moratorium has been extended several times, it likely won’t last forever.

As a bank, SoFi can now start making more money on its loans by keeping them on balance longer and charging recurring monthly interest payments.

Additionally, I am excited to see how SoFi integrates Galileo with its new Technisys acquisition and offers this technology stack to other banks and fintech companies. The company is not yet profitable and may face some short-term pressure still trading around a $5 billion market cap. But I like the direction SoFi is heading and see this as a solid entry point as a long-term buy.

Add Comment