Sticking With This SoFi Price Target After Guidance Raise

On Tuesday morning, core Sarge-folio holding SoFi Technologies SOFI went to the tape with the firm's first quarter financial results. 

For the three-month period ended March 31, SOFI posted a GAAP EPS of $0.06 on revenue of $771.759 million. These top- and bottom-line numbers both easily beat Wall Street's expectations, while revenue generation was good enough for year-over-year growth of 32.8%. This was the fastest pace of year-over-year growth for the firm since Q2 of last year.

For the period reported, adjusted EBITDA was up 46% to $210 million, fee-based revenue was up 67% to $315 million, member growth was up 34% to a record 10.9 million, and product growth was up 35% to a record 15.9 million. While net income was down 19.2% to $71.116 million, net income attributable to shareholders was up a tremendous 217.3% to $71.455 million. This metric is in accordance with GAAP guidelines and excludes gains made on the extinguishment of debt, net of tax, as well as interest expense incurred associated with convertible note activity during the period. The GAAP EPS print of $0.06 is up sharply from the year-ago comp of $0.02 despite the higher share count due to the dilutive impact of those (2029) convertible notes.

I may be biased. Heck, we both know that I am. I am long the shares and have been writing favorable on the stock for some time now. That said, in my opinion, to say that CEO Anthony Noto and SoFi Technologies were merely executing at an extremely high level would be quite the understatement.

Segment Performance

• Financial Services: generated revenue of $303.119 million (+101%) as net interest income increased 45% to $173.199 million and non-interest income increased 321% to $129.92 million. Provisions for credit losses were down 21% to $5.639 million, as expenses increased 40% to $149.148 million. Segment profit contribution increased 299% to $148.332 million as segment contribution margin improved from 25% to 49%.
• Technology Platform: generated revenue of $103.427 million (+10%) as net interest income decreased 18% to $413,000 and non-interest income increased 10% to $103.014 million. Expenses increased 14% to $72.514 million. Segment profit contribution increased 1% to $30.913 million as segment contribution margin dropped from 33% to 30%.
• Lending: generated revenue of $413.373 million (+25%) as net interest income increased 35% to $360.621 million and non-interest income decreased 17% to $52.752 million. Expenses increased 47% to $173.399 million. Segment profit contribution increased 15% to $238.935 million as segment contribution margin dropped from 63% to 58%.

The CEO

CEO Anthony Noto commented in the press release: 

"In Q1, we delivered durable growth and strong returns driven by our relentless focus on product innovation and brand building. We delivered our highest revenue growth rate in five quarters, driven by new records in members, products, and fee-based revenue. These results demonstrate the strength of SoFi's unique strategy, combination of businesses, and product architecture, which give us a sustainable competitive advantage with the highest lifetime value per member."

Then Noto got to the goods:

"This allows us to innovate unmatched products and services that help members spend less than they make and invest the rest so they can get their money right and realize their ambitions. With strong momentum in the first quarter, we are both accelerating our rate of innovation and increasing our financial guidance for 2025.”

Guidance

SoFi Technologies increased full-year revenue guidance from $3.2 billion to $3.275 billion to $3.235 billion to $3.31 billion, implying annual growth of 24% to 27%. Adjusted EBITDA is seen at $875 million to $895 million. Full-year GAAP EPS is now seen at $0.27 to $0.28, up from prior guidance of $0.25 to $0.27. Wall Street was looking for $0.26.

For the second (current) quarter, net revenue is projected at $785 million to $805 million with adjusted EBITDA at $200 million to $210 million, resulting in a GAAP EPS of $0.05 to $0.06. This takes the midpoint of this guidance above the top- and bottom-line Wall Street expectations. Wall Street was looking for guidance of $0.05 on about $791 million.

My Thoughts

This is a great quarter. The guidance raise is simply more to like. Right now, the firm is doing everything right. Membership, product sales and the financial services sector are all growing like a weed, while technology and lending sectors are growing steadily.

The double-bottom pattern of reversal that we had shown readers a couple of weeks back has now fully developed. The shares are trying to break out past the $13.90 pivot on Tuesday morning and have struggled to hold that level. That said, the stock has retaken its 200-day SMA, 21-day EMA and now, its 50-day SMA in succession.

This should help keep swing traders and portfolio managers invested for now. Relative strength has moved higher and now appears to be very healthy with reaching into technically overbought territory. The daily MACD is in a better place as well. The histogram of the nine-day EMA is above zero. The 12-day EMA is above the 26-day EMA as well as above the zero-bound.

Only the 26-day EMA still lags in negative territory. Once that line reaches into positive territory, which I would expect this week, the technicals (at least the ones I focus on) will all be positive for this stock.

SoFi Technologoies (SOFI)

Target Price: $18.50 (reiteration, with an upside bias) 

Pivot: Apex of center peak of double-bottom pattern (currently $13.90) 

Add: Down to the 200-day SMA (currently $11.70) 

Panic: Loss of contact with the 200-day SMA.

At the time of publication, Guilfoyle was long SOFI equity.