New Wall Street High SoFi Price Target After 'Blowout Quarter'
Guidance as much as the second-quarter results is the 'why' behind the rally.
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On Tuesday morning, longtime Sarge-fave and core "Stocks Under $10" holding SoFi Technologies SOFI released its second-quarter financial results. For the three-month period ended June 30, the financial services firm posted GAAP EPS of $0.08 on total revenue of $854.944 million or adjusted net revenue of $858.23 million.
These numbers all easily beat expectations, with EPS comparing quite nicely to $0.01 for the year-ago period, while reflecting year-over-year revenue growth of 43% (GAAP) or 44% (adjusted).
Adjusted EBITDA grew 81% to $249 million. Fee-based revenue was up 72% to $378 million. Membership increased by 34% to 11.7 million members. Product growth was up 34% to 17.1 million products.
It's the CEO
"I told you this guy was good years ago. I saw him play college ball for Army. He made literally every tackle."
- Stephen "Sarge" Guilfoyle
CEO Anthony Noto commented in the press release:
“We accelerated adjusted net revenue growth to 44% year-over-year, the highest level in over two years, driven by record high new members, as well as new products, and an increase in fee-based revenue. This consistent, disciplined investment across our platform, combined with unmatched products and services, uniquely positions us to capture the massive and expanding opportunities ahead. Looking forward, we are focusing on innovating faster than ever before to serve more of our members' needs and increasing our financial guidance for 2025.”
In an interview published at Barron's on Tuesday morning, Noto added, "Consumers are looking to refinance very high-cost credit card debt that could average over 25% interest rates into much cheaper, more affordable debt at about 12% to 13% percent with us, so we're seeing strong demand."
Segment Performance
Financial Services generated net revenue of $362.533 million (+106%). Directly attributable expenses grew 50% to $164.27 million, while the segment provision for credit losses dropped 14% to $10.031 million. This left a segment contribution profit of $188.232 million (+241%) on a contribution margin that grew from 31% to a stunning 52%.
Technology Platform generated net revenue of $109.567 million (+15%). Directly attributable expenses grew 19% to $76.638 million. This left a segment contribution profit of $33.195 million (+7%) on a contribution margin that dropped from 33% to 30%.
Lending generated net revenue of $443.512 million (+30%). Directly attributable expenses grew 43% to $202.088 million, while the change in valuation inputs and assumptions improved from -$1.654 million to $3.274 million. This left a segment contribution profit of $244.71 million (+24%) on a contribution margin that dropped from 58% to 55%.
Guidance
For the full year, SoFi now expects to generate adjusted net revenue of approximately $3.375 billion. That's up from its prior guidance of $3.235 billion to $3.31 billion and well above the $3.29 billion that Wall Street had in mind. The implication is now for full-year revenue growth of 30% as opposed to 24% to 27%.
The firm now expects to see full-year GAAP EPS of $0.31, which is an increase from previously issued guidance for $0.27 to $0.28. Wall Street was looking for $0.28. This guidance as much as the blowout quarter reported is the "why" behind Tuesday morning's rally.
On Cryptos & AI
SoFi made waves in June when the firm announced that it would return to the world of cryptocurrency, reversing a decision to exit that market in 2023.
Returning to the interview in Barron's mentioned above, Noto said, "We can give people access to investing in this asset class and using it as a devaluation tool globally, in places where currencies aren't as stable as the U.S. dollar." Then Noto added, "Our products and services will be better in the future than they are today. This is the worst they'll ever be because technologies like AI and blockchain will allow us to move money faster."
The Chart
About three weeks ago, I showed you a similar chart of SoFi that has evolved somewhat.
Three weeks ago, we added an Andrews' Pitchfork model to the breakout from our inverted head and shoulders pattern of bullish reversal. The shares have continued to adhere to the upward trend illustrated by this Pitchfork but did consolidate a little ahead of these earnings. The stock did find support at the central trendline of the model once last week and again on Monday. Tuesday morning, we should see an attempt by the shares to test the upper trendline.
Relative strength remains quite robust but has come out of a technically overbought condition. The daily MACD (moving average convergence/divergence) had grown more bearish looking, with the histogram of the 9-day exponential moving average (EMA) dropping below zero and the 12-day EMA crossing below the 26-day EMA. These recent negatives will go a certain distance towards re-reversing Tuesday morning, which is a positive for the bulls.
Last week's high of $22.74 now becomes the pivot. I use dollars and cents for low-priced stocks. SoFi is no longer a low-priced stock; hence we just use dollars, making $23 the new pivot for me. Already the high price target price on Wall Street, we are increasing our target further this morning.
SoFi Technologies (SOFI)
Price Target: $29 (up from $26)
Pivot: $23 (up from $21)
Add: Between the 21-day EMA and the 50-day simple moving average (SMA)
Panic: Loss of contact with the 200-day SMA
At the time of publication, Guilfoyle was long SOFI equity.
