Sticking With This SoFi Price Target Despite Post-Earnings Weakness
I'm adding to my SoFi position amid a beatdown for shares.
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To answer your first question, yes, I have already added to my existing long position in SoFi Technologies SOFI on Monday morning's weakness.
At the headline, the numbers were fine. In fact, better than fine. For the firm's fourth quarter, which ended December 31, 2024, SOFI posted an adjusted EPS of $0.05 (GAAP EPS: $0.29) on revenue of $734.125 million. These top- and bottom-line numbers both beat Wall Street's expectations, while the revenue print was good enough for year-over-year growth of 19.3%. Non-recurring income tax benefits from a tax valuation allowance and from restructuring totaled $271.443 million. Hence, the $0.24 per share negative adjustment to EPS.
For the period, fee-based revenue increased 63% to $289.5 million, as the firm reported its fifth consecutive quarter of GAAP profitability. For the quarter, net interest margin reached 5.91%, up 34 basis points sequentially, but down 11 basis points annually. Record new member additions of 785,000 for the quarter brought total membership up to more than 10.1 million (+34%), while record new product additions of 1.1 million put total product sales at more than 14.7 million (+32%). Financial services products were up 34% and drove 90% of the firm's total growth, while lending products were up 21%. The technology platform posted growth of 15%.
SoFi CEO Comments on Earnings
CEO Anthony Noto, who most readers know I am a fan of and is a huge part of my belief in this firm, commented in the press release:
"2024 was SoFi's best year ever. Our ability to deliver durable growth and strong returns throughout the year was once again the direct result of our relentless focus on innovation and brand building. SoFi set new records in revenue, profit, members and products in 2024, and we look forward to continuing to build momentum on this in 2025."
Noto then commented on the period reported:
“In the fourth quarter, our Financial Services and Tech Platform segments made up a record 49% of SoFi's adjusted net revenue, up from 40% in the year ago quarter. These businesses grew revenue by a combined 52% year-over-year, a testament to our continued execution and deliberate shift towards capital-light, higher ROE, cash, fee-based revenue streams.”
Segment Performance
- Financial Services: Net interest income grew 47%, as non-interest income grew 220%. Net revenue was up 84% to $256.52 million. Contribution profit increased 358% to $114.855 million as contribution margin grew from 188% to 45%.
- Technology Platform: Net interest income, already tiny, dropped 50%, as non-interest income grew 7%. Net revenue was up 6% to $102.835 million. Contribution profit increased 5% to $32.107 million as contribution margin contracted from 32% to 31%.
- Lending Segment: Net interest income grew 31%, as non-interest income dropped 20%. Net revenue was up 18% to $417.958 million. Contribution profit increased 9% to $245.958 million as contribution margin contracted from 64% to 59%.
On Student Loans
Student Loans saw its best quarter of originations since the end of 2021, reaching $1.3 billion, a 71% year-over-year increase.
Guidance
It's obvious that SOFI had a great quarter. Why the beatdown for the shares?
The guidance wasn't perfect. For the current quarter, sees adjusted revenue of $725 million to $745 million, which is well above the $700 million or so that Wall Street had in mind. However, adjusted EBITDA is seen printing below expectations as GAAP EPS is projected at $0.03. That's two cents below the nickel that had been the consensus view.
For the full year, adjusted revenue is seen at $3.2 billion to $3.275 billion, which is well above estimates. Here again, though, adjusted EBITDA is projected below expectations and GAAP EPS is projected at $0.25 to $0.27. Wall Street had been at $0.29 for this metric.
The mismatched revenue growth and creased profitability is largely due to some macroeconomic assumptions and based on an expected 2025 tax rate of 26%, which may or may not be accurate depending on what happens in Washington, D.C., and probably was not backed into too many estimates. It's an intentionally conservative estimate and I am not overly concerned.
This is where I think we get the chance to prove that we're smarter than algorithmic traders that are busy all day reading up on the New York Knicks and the NFL while their machines do all the work.
Rock, Rock 'Til You Drop
I showed you this chart on Friday. The difference is that now the stock needed the 50-day SMA to step in as support, which is close to where I added today, as opposed to pressuring the upper trendline of our Pitchfork. Of course, I am prepared to add some more.
Relative strength has cooled but is still no worse than "neutral." The daily MACD is still, despite weakening a bit, postured quite bullishly, with the histogram of the nine-day EMA above zero and the 12-day EMA above the 26-day EMA while both remain above zero.
SoFi Technologies (SOFI)
Target Price: $23 (reiteration)
Pivot: Upper Trendline (currently $19)
Add: Down to the 50-day SMA (as I wrote on Friday and acted on this morning)
Panic: 200-day SMA (currently $9.70, in other words... I ain't panicking)
PS: In case these algo traders haven't noticed, SoFi Tech is kicking some tailbone out there.
At the time of publication, Guilfoyle was long SOFI equity.
