Shares in SoFi Technologies, which began life as a student loan lender in 2011 and since expanded to offer banking, personal loans, mortgages and investing services via its mobile app, have trended lower so far in 2022. As the personal finance firm prepares to announce its first quarter earnings, analysts are forecasting positive revenue growth.
SoFi Technologies [SOFI] is forecast to report a 30.5% hike in year-over-year revenues when it releases its first-quarter results on 10 May, driven by growth in both memberships and products.
Analysts at Zacks Equity Research expect the personal finance firm to post revenues of $281.9m for the three months ending 31 March, compared with the $216m it posted in the same period last year.
However, the anticipated Q1 results mark a decline from the December quarter, when the company posted revenues of $286m and an earnings loss of $0.15 per share. Earnings are expected to come in at a loss of $0.14 in Q1.
Zacks also expects SoFi’s full year estimates to be strong, with earnings of $0.42 per share and revenues of $1.48bn. This would represent year-over-year growth of 58% and 50%, respectively.
Promising fourth-quarter results
In the three months ending 31 December, SoFi posted a record 523,000 increase in quarterly members, up 39% sequentially, and a record 906,000 quarterly new product adds, up 51% sequentially.
Lending products increased by 18% in the fourth quarter and saw expansion across all loan types. Record demand for personal loans was the largest growth driver, the group said, followed by an increase in demand for student loans in the lead-up to the end of the freeze on US student loan repayments introduced during the pandemic (although this was since extended in April 2022).
Total GAAP net revenue of $984.9m for full-year 2021 increased 74% on its 2020 figures. It recorded a GAAP net loss of $111m for the fourth quarter and $483.9m for the full year. This compared with net losses of $82.6m and $224.1m, respectively, in the prior-year periods.
“We hit new highs,” Anthony Noto (pictured), CEO of SoFi, said at the fourth-quarter announcement. The group also said that it had benefitted from greater brand recognition, helped by having the naming rights to the NFL stadium in Los Angeles used by the LA Rams and LA Chargers.
Challenges for the SoFi stock
The SoFi share price is trending downwards ahead of its Q1 announcement amid wider economic uncertainty and a shift from growth to value stocks. The stock has slumped 62.2% since the start of the year to close at $5.97 on 6 May.
While the company’s earnings could help the stock to rebound, a headwind could come in the form of changes to the planned end to the moratorium on student loans in the US. President Joe Biden extended the repayment freeze from 1 May to 31 August 2022, easing the pressure on students needing help with college debts.
SoFi said it expected this deadline to be extended further due to mid-term elections in November. Indeed, the company does not expect the moratorium to end at any point this year.
As a result of this change, SoFi adjusted its revenue guidance for 2022 in April. It forecasts 2022 revenues of $1.47bn, down from previous expectations of $1.57bn. EBITDA is expected at $100m, down from $180m.
Analysts rate SoFi a buy
Analysts are broadly optimistic on the outlook for the SoFi stock. According to 14 analysts polled by MarketScreener, the stock has a consensus ‘outperform’ rating and an average target price of $14.60.
Mizuho Securities analyst Dan Dolev gave the stock a ‘buy’ rating and a $14 price target. He wrote in a research note last month that some investors fear revenues will be battered by rising interest rates, but he believes SoFi has hedged against the rate hikes. Dolev added that it also helped boost incomes for its banking arm by as much as $110–115m, rather than the $70–75m estimate incorporated in the company’s guidance.
Citi analyst Ashwin Shirvaikar has a $17 price target on the stock. Though he wrote in a recent note that he expects the stock will be hit in the near term by the student loan freeze extension, he maintains that there are long-term hopes. “The value in SoFI derives not from this year’s EBITDA but from the creation of the flywheel which pulls in high-earning members via financial services and monetizes via lending and from underlying positional strength in tech services,” Shirvaikar wrote.
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