New SoFi Price Target After Record-Breaking Surge
The financial services firm is enjoying a nice run after Cathie Wood's Ark Invest made a 321,000 share sale.
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Former Michie Stadium legend Anthony Noto just keeps on delivering for shareholders of SoFi Technologies (SOFI) .
I had a feeling that SoFi Technologies would post a solid quarter when I saw that Ark Invest, of Cathie Wood fame, had been trimming its holdings of SOFI throughout the month of October for its ARK Fintech Innovation ETF (ARKF) . In all fairness, and all kidding aside, that was just some profit taking and likely an exercise in risk management ahead of SOFI's earnings.
ARKF had sold more than 321,000 shares of SOFI since mid-October, leaving the funds with a rough 1.68 million shares as of Tuesday morning, which makes SOFI the fund's seventh-largest holding.
For the firm's third quarter, which ended September 30, SOFI posted a GAAP EPS of $0.11 on adjusted net revenue of $949.6 million or GAAP revenue of $961.6 million. The firm adjusted the revenue number in order to exclude almost $12 million in non-operational revenue, realized from servicing rights and changes to input valuations for investor purposes The top-line number easily beat Wall Street while sporting year-over-year growth of 36,3% for the adjusted print and 38% for the GAAP number. The bottom-line number beat expectations as well, by three cents per share.
New Records Upon New Records
Taylor Swift? No. Anthony Noto? Of course...
- Adjusted net revenue of $949.6 million (+38% and a new record)
- Adjusted EBITDA of $277 million (+49% and a new record)
- Fee-based Revenue of $409 million (+50% and a new record)
- Member growth of 35% to 12.6 million (a new record)
- Product growth of 36% to 18.6 million (a new record)
Segment Performance
- Financial Services generated net revenue of $419.623 million (+76%) as net interest income grew 32% to $203.66 million and non-interest income grew 157% to $215.963 million. The provision for credit losses increased from $6.008 million to $9.199 million. Contribution profit increased 126% to $225.557 million as contribution margin improved from 42% to 54%.
- Technology Platform generated net revenue of $114.578 million (+12%) as net interest income grew 31% to $432,000 and non-interest income grew 12% to $114.146 million. Contribution profit decreased 2% to $32.371 million as contribution margin dropped from 32% to 28%.
- Lending generated net revenue of $493,382 million (+25%) as net interest income grew 35% to $427.973 million and non-interest income dropped 18% to $65.409 million. Contribution profit increased 9% to $261.6 million as contribution margin dropped from 60% to 53%.
Guidance
For the full year, SOFI sees at least 3.5 million new members, which would be good for growth of 34% from 2024. Adjusted net revenue is now projected at $3.54 billion, up from previous guidance for $3.375 billion and above the $3.46 billion that Wall Street was looking for. That would be good for annual growth of 36%, above previous guidance for 30% growth
SOFI now expects to see full year adjusted EBITDA of $1.035 billion, well above prior guidance for $960 million. That would represent an EBITDA margin of 29%. SOFI sees adjusted net income of $455 million for the year, up from prior guidance for $370 million. Lastly, the firm sees full year adjusted EPS of $0.37, well above prior guidance for $0.31 and well above the $0.32 that Wall Street was expecting.
My Thoughts
What's not to like? Record revenues. Rapid growth in membership and sales. Huge margins. SOFI is absolutely crushing the Rule of 40, qualifying the stock hypothetically as a "growth" stock and making it worthy of its elevated valuation.
Like I had with Palantir Technologies (PLTR) (new target price in Tuesday morning's Market Recon column), I had warned about a forming double-top pattern of bearish reversal for SOFI a little more than a week ago. That threat seems to have passed. What we have now is a potential third positive technical pattern in a row.
The stock blasted out of an inverted head-and-shoulders pattern this past summer. Then, the stock got a boost from an ascending triangle of bullish continuance in late summer/early Autumn. This is now being supported by a cup pattern which may or may not develop a handle after finding support repeatedly at the stock's 50-day SMA.
Both the stock's RSI and daily MACD are postured bullishly. The pivot now becomes the left-side apex of the cup. Should a handle develop, this would be an opportunity to add to long positions and the pivot would shift to the right-side apex of the cup.
SoFi Technologies (SOFI)
Target Price: $37 (up from $33)
Pivot: $30 (up from $26)
Add: At the 50-day SMA (currently $27)
Panic: Loss of the 200-day SMA (currently $18)
At the time of publication, Guilfoyle was long SOFI and PLTR equity.
