Banking platform SoFi Technologies (SOFI) continues to grab investors’ attention despite experiencing a 34% decrease in its share price in 2024. The company’s robust financial health, impressive fundamentals, and potential for a tailwind from interest rate cuts suggest better days ahead. SoFi reported top-and-bottom-line Q2 results, surpassing expectations by reporting a 22% year-over-year increase in revenue on strong membership growth.
The stock trades at a relative discount to industry peers, making it a solid option for value investors interested in exposure to digital lending.
SoFi’s Suite of Services
SoFi Technologies is an online personal finance and bank holding company. It offers a suite of services and unique technology products and solutions in the United States, Latin America, and Canada. The company is divided into three segments: Lending, Technology Platform, and Financial Services.
The company offers credit cards, personal finance tools, insurance, travel management apps, and employee financial benefits operations. It also provides Galileo, a technology platform catering to financial and non-financial institutions, and Technisys, a digital and core banking platform.
Additionally, it provides a marketplace platform for alternative financial products and referrals for pre-qualified borrowers, all while facilitating loan sales to third-party partners.
SoFi’s Recent Financial Results & Outlook
The company recently reported its Q2 financial results. Revenue of $596.97 million beat analysts’ expectations by $30.05 million while marking a 22.1% year-over-year increase. The company added over 643,000 new members in the quarter, bringing its total membership to nearly 8.8 million, a 41% increase from the previous year. In addition, the company celebrated a 58% year-over-year asset boom under management, which was attributed to SoFi Invest.
Further, the net interest income for the second quarter was $412.6 million, a 42% year-over-year increase. Regarding profitability, SoFi reported $137.9 million in adjusted EBITDA in Q2, an 80% year-over-year increase. Earnings per share (EPS) of $0.01 beat consensus expectations of $0.
Following the Q2 results, SoFi’s management has given guidance for Q3, projecting adjusted net revenue between $625 and $645 million, adjusted EBITDA of $160 to $165 million, net income ranging from $40 to $45 million, and an EPS of $0.04.
Furthermore, the full-year forecast for 2024 projects adjusted net revenue between $2.425 and $2.465 billion, indicating a 17% to 19% annual growth rate. The lending revenue is expected to be no less than 95% of 2023’s performance. The Financial Services segment’s revenue is predicted to increase by over 80%, with the Tech Platform’s revenue expected to grow by a mid-to-high teens percentage. Full-year GAAP net income is anticipated to be between $175 to $185 million, and GAAP EPS from $0.09 to $0.10.
What Is the Price Target for SOFI Stock?
The stock has been volatile, with a beta of 2.19, as it has been on a multi-year downward trend, shedding 56% over the past three years. It trades at the bottom of its 52-week price range of $6.15 – $11.70 and shows negative price momentum by trading below the 20-day (6.86) and 50-day (6.94) moving averages. With a P/B ratio of 1.17x, the shares are relatively undervalued compared to the Credit Services industry average of 4.3x.
Analysts following the company have taken a cautiously optimistic stance on the stock. For instance, Needham analyst Kyle Peterson recently reiterated a Buy rating on the shares with a price target of $10.00. He noted the strength of SoFi’s lending business, technology platform, and financial services that the market has yet to recognize fully.
Based on the recommendations and price targets recently issued by 16 analysts, SoFi Technologies is rated a Hold. The average price target for SOFI stock is $8.27, representing a potential 27.62% upside from current levels.
SoFi in Summary
SoFi’s robust financial health, impressive fundamentals, and potential benefit from prospective interest rate cuts paint a promising picture for the future. The company’s Q2 results exceeded expectations, and management expects continued growth. The stock trades at a discount relative to its peers, making it a potential option for value investors seeking exposure in the digital lending industry.
