Shares of SoFi technologies (NASDAQ: SOFI) fell 9.9% through 12:15 a.m. on Monday, even after the company reported a profit drop this morning.
Heading into the first quarter of 2024, analysts forecast that SoFi would earn just $0.01 per share on quarterly revenue of $556 million. In fact, earnings were twice as high as expected at $0.02 per share, and revenue was strong at $645 million. But the stock is still down.
The first quarter earnings report
First quarter revenue rose 37% year over year, which is a great start. SoFi also turned to a profit from a year-ago loss. Total deposits at the internet bank rose 16% to a record $3 billion, and its customers are now rated as 'high quality', with a median FICO score of 774, making them good candidates for loans. (The company's net interest margin is a strong 5.9%).
That all sounds great. Where things went badly was the guidance.
Are SoFi Stocks a Sell?
Management forecasts that revenue will grow faster than expected in 2024, to approximately $2.4 billion, with higher profits as well – at least $0.08 per share, as calculated under generally accepted accounting principles (GAAP). The problem is that SoFi said second-quarter revenue will only be $555 million to $565 million, while Wall Street wants to see revenue of $580 million.
That seems to have panicked investors, but I don't think they have anything to worry about. Assuming SoFi reaches even the lower end of its target this year, revenue will rise 89% and profits will grow even faster. Earnings are expected to triple in 2025 and double again in 2026, by which time the company would earn almost $0.50 per share.
Is $7 per share really too much to pay for a share that yields $0.50? I don't know about you, but fourteen times earnings, even over two years, seems cheap for a fintech growing as fast as SoFi. Investors are selling SoFi stock today, but to me it really looks like a buy.
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Rich Smith has no position in any of the stocks mentioned. The Motley Fool recommends Fair Isaac. The Motley Fool has one disclosure policy.
Why shares of SoFi Technologies fell 10% on Monday was originally published by The Motley Fool
