SoFi Technologies (SOFI) has seen an 18% jump in its stock price over the past few days after the announcement of a $2 billion loan platform business agreement with Fortress. The company is enjoying a resurgence, as evidenced by an impressive 41% year-over-year increase in members to 8.8 million through the most recent quarter.
This growth has driven the adoption of the company’s services, particularly its financial segment, which experienced an 80% year-over-year revenue increase, marking three consecutive profitable quarters. With further anticipated profitability on the horizon, SoFi’s focus on providing a comprehensive financial solution continues to pay off. The stock is a solid choice for investors looking for exposure to financial services in a declining rate environment.
SoFi Levering Partnerships To Add Complementary New Services
SoFi Technologies is an online provider of diverse financial services, offering various lending and financial products to its members. It operates Galileo, a tech platform for financial institutions, and Technisys, a core banking platform for cloud-native solutions. SoFi also provides checking and savings accounts, flexible investment options, a cash-back credit card, personal finance management through SoFi Relay, and insurance with SoFi Protect.
The company has announced a $2 billion loan platform business agreement for personal loans with funds managed by Fortress Investment Group. The collaboration is seen as a strategic move for SoFi to serve more members and diversify its revenue sources towards less capital-intensive and fee-based areas.
Further, to modernize its equity program management and enhance IPO accessibility, SoFi has partnered with PrimaryBid Technologies to launch DSP2.0, an advanced Directed Share Platform. Traditional DSPs have been costly, time-consuming, and limited in investor participation. DSP2.0 addresses these issues by integrating modern marketing analytics, reducing manual processing, and providing greater flexibility for companies to engage non-institutional investors at scale. This new platform offers a fully digital, cost-free, and deposit-free method for companies to distribute IPO shares to a wider audience
Analysis of SoFi’s Recent Financial Results & Outlook
The company has recently published its Q2 financial results, surpassing analyst expectations with revenue of $596.97 million, representing a year-over-year increase of 22.1%. The firm added 643,000 new members during the quarter, increasing total membership to nearly 8.8 million – a 41% year-over-year increase. Notably, there was a 58% year-over-year growth in assets under management due to SoFi Invest. Meanwhile, the net interest income for Q2 stood at $412.6 million, marking a 42% year-over-year rise. The company reported $137.9 million in adjusted EBITDA, an 80% year-over-year increase, with earnings per share (EPS) of $0.01, surpassing consensus expectations.
For Q3, management anticipates an adjusted net revenue between $625 and $645 million, an adjusted EBITDA of $160 to $165 million, a net income between $40 and $45 million, and an EPS of $0.04. The company’s full-year 2024 forecast projects adjusted net revenue between $2.425 and $2.465 billion, suggesting a 17% to 19% annual growth rate.
Meanwhile, the lending revenue is expected to match at least 95% of 2023’s performance. The Financial Services segment’s revenue is predicted to increase by over 80%, and the Tech Platform’s revenue is expected to grow by a mid-to-high teens percentage. Full-year GAAP net income is projected to be between $175 and $185 million, with a GAAP EPS ranging from $0.09 to $0.10.
Is SoFi a Buy?
The stock has been on a multi-year downtrend, shedding over 50% in the past three years. However, it has shown some resilience, climbing roughly 30% in the past three months. It trades at the high end of its 52-week price range of $6.01 – $10.49 and shows positive price momentum, trading above its 20-day (7.72) and 50-day (7.45) moving averages. With a P/S ratio of 4.3x, it appears to be at a slight discount to the Credit Services industry average P/S ratio of 4.7x.
Analysts following the company have taken a cautiously optimistic stance on the stock. Based on seven analysts’ recent recommendations, SoFi Technologies is rated a Moderate Buy overall. The average price target for SOFI stock is $8.40, which represents a potential decline of 17.49% from current levels.
SoFi in Summary
SoFi Technologies has proven its resilience in the financial services sector. Its latest service ventures point towards diversification and increased revenue generation. Despite a past downtrend, the recent strong financial performance indicated by Q2 results, promising projections, and current position at a slight discount to the industry average make this a potential window of opportunity for investors.
