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In the high-paced world of finance, the movements of big-money investors and well-placed insiders can provide crucial insights into the potential future performance of a stock. SoFi Technologies Inc. (SOFI), a leading fintech company, has recently been in the spotlight due to noteworthy activities involving significant stakeholders.
The Qatar Investment Authority, a major stakeholder in SoFi, decided to unload its entire stake in the company in early June. Meanwhile, SoFi’s CEO, Anthony Noto, demonstrated his confidence in the firm by purchasing approximately $797,000 worth of shares around the same period. This contrasting scenario of insider buying and institutional selling presents a mixed bag of signals for investors trying to navigate the complexities of SoFi’s stock performance.
Amid these conflicting moves, SoFi stock currently has a “Hold” rating overall, indicating a cautious but steady sentiment among analysts.
In this article, we'll take a closer look at SoFi Technologies by examining its financials, valuation, growth prospects, and sentiment in the options market.
About SoFi Technologies Stock
Founded in 2011 and based in California, SoFi Technologies, Inc. (SOFI) provides various financial services in the United States, Latin America, and Canada.
Valued at $6.83 billion by market cap, SoFi offers financial products, including student and auto loan refinancing, mortgages, personal loans, credit cards, investing, and banking through both mobile app and desktop interfaces.
Shares of the fintech-focused lender have lost 24.3% over the past 52 weeks, and SOFI stock is down about 34.3% on a year-to-date basis.
Recent News for SOFI Stock
On June 6, BTIG initiated coverage of SoFi Technologies with a “Neutral” rating. BTIG analysts informed investors in a research note that the company has consistently shown robust top-line growth, with increasing numbers of new customers, high active account figures, substantial deposit inflows, and expanding technology partnerships.
BTIG added that, on the downside, persistent worries regarding credit trends, capital levels, and increased bank regulation will continue to exert pressure on shares.
On June 3, SoFi Technologies introduced Stephen Simcock as its new general counsel. With over three decades of experience aiding retail financial institutions in navigating dynamic markets and changing regulatory environments, Simcock will take charge of SoFi’s legal department following the retirement of Rob Lavet, the company’s chief legal officer.
On May 21, SoFi announced the placement of a $350 million personal loan securitization for Q1 2024, exclusively with funds and accounts managed by PGIM Fixed Income, a Prudential Financial company.
Recent Big-Money Moves on SoFi Stock
On June 14, the Qatar Investment Authority disclosed that it had sold off its entire stake in SoFi Technologies. According to an SEC filing, the QIA sold 19.3 million shares of the bank and fintech company at an average price of $6.78 on June 13. The sale of the shares was conducted by QIA FIG Holding, a subsidiary of the QIA.
At the same time, in a regulatory filing, SoFi disclosed that its CEO Anthony Noto purchased 30,715 shares of the company on June 14 at an average price of $6.4825, valuing the transaction at about $198,834.
Noto now holds a total of 8.57 million shares in the company, which equates to 0.81% of the total outstanding shares.
SoFi Plunges Even After Q1 Double Beat, FY24 Guidance Hike
Despite beating on the top and bottom line, as well as raising its full-year guidance, the company’s stock fell more than 10% in a day after earnings, as investors reacted to a decline in lending activity and a disappointing second-quarter forecast.
In Q1, SoFi recorded a total net revenue of $645.0 million, marking a 37% increase compared to the same period in 2023. Also, its adjusted net revenue grew 26.2% year-over-year to $580.65 million, topping analysts’ expectations by $21.12 million. Notably, adjusted net revenue is calculated as total net revenue, adjusted to exclude fair value changes in servicing rights and residual interests categorized as debt due to changes in valuation inputs and assumptions, only related to the lending segment, along with gains and losses on debt extinguishment.
It is important to note that the company’s total lending net revenue decreased by 2% year-over-year to $330.5 million in Q1, accompanied by a decline in the segment’s contribution profit. Management characterized this performance as adopting a more conservative approach to originations, driven by concerns about interest rate uncertainty and the broader macroeconomic environment.
Nevertheless, this decline in lending was offset by the stronger performance of SoFi Technologies’ financial services segment, which saw continued efforts in acquisition, monetization, and notably, significant margin expansion. The financial services products segment attained a record net revenue of $151 million in Q1, marking an 86% year-over-year increase and an 8% rise from the previous quarter. This highlights the strong operating leverage within this segment, as SoFi achieved this 86% growth with only an 8% increase in directly attributable expenses compared to the previous year.
Also, the segment delivered $37 million in contribution profit with a 25% margin, a significant improvement from the $24 million loss reported in the year-ago quarter, highlighting notable progress given the company’s substantial investments in its Money, Credit Card, and Invest products. Overall, financial services products constitute a key element of SoFi Technologies’ growth story. It had 10.1 million financial services products on offer at the end of Q1, marking a year-over-year growth rate of 42%, whereas lending products experienced only a 20% year-over-year growth.
SOFI reported GAAP EPS of $0.02, exceeding the average analyst estimate of $0.01. That was flat compared to Q4 2023, but showed improvement from the per-share loss of $0.05 in Q1 2023. The enhancement in its EPS profile is another positive signal. The business model clearly shows a consistent link between revenue growth and enhanced profitability.
The company also delivered adjusted EBITDA of $144 million, with a 25% margin, representing a remarkable 91% year-over-year growth. New member additions totaled nearly 622,000 for the quarter, pushing the number of total members to over 8.1 million by quarter-end, marking a 44% increase from the previous year period and indicating significant potential for EBITDA and EPS growth.
SoFi Technologies offered a strong forecast for 2024. SoFi Technologies revised its full-year net sales outlook to $2.39-2.43 billion, exceeding the previous implied range by $25 million, raised its adjusted EBITDA outlook to $590-600 million from the previous $580-590 million, and increased its GAAP net income projection to $0.08-0.09 per share, up from prior guidance of $0.07-$0.08.
However, investors directed their attention to SoFi’s Q2 guidance, which pointed to a sequential drop in both the company’s revenue and earnings. For the second quarter, management expects to deliver adjusted net revenues of $555 to $565 million, adjusted EBITDA of $115 to $125 million, and net income of $5 to $10 million.
Analysts tracking Sofi Technologies expect the company’s earnings to reach $0.08 per share in fiscal 2024, compared to a year-ago loss of $0.10 per share. Additionally, analysts expect SOFI’s full-year revenue to grow by 16.83% compared to the previous year, reaching $2.42 billion.
SOFI Stock Valuation
When assessing SoFi’s valuation, the stock’s forward Price/Sales ratio stands at 2.76x, slightly above the sector’s median of 2.55x, but below the stock’s five-year average of 3.79x. Given the company's robust growth and strong emphasis on technology, the current valuation appears well justified, if not undervalued.
Looking at SoFi’s revenue growth projections for 2024, its adjusted net revenue projection implies a 15-17% year-over-year increase. This growth rate substantially exceeds the sector’s median revenue growth of 5.13%.
I believe the stock merits trading at a higher premium compared to the sector’s median forward price-sales multiple, which could positively impact its stock price.
Options Market Sentiment on SOFI Stock
Looking at the September 20, 2024, option chain, we see a bid/ask for the $6.00 CALL option of $0.98/$1.02, and a bid/ask for the $6.00 PUT option of $0.37/$0.40. Remember that this is the option strike closest to the current stock price. We can calculate the expected price move using the mid-prices of these options:
0.39 (6.00 Put) + 1.00 (6.00 Call) = 1.39/6.54 = 21.3%
The options indicate a potential movement of around 21% either up or down from the $6.00 strike price by September expirations when using the long straddle strategy.
Moreover, there are three times as many open puts as calls at the $6.00 strike price, with 13,048 puts compared to 4,259 calls, indicating a bearish sentiment in the options market and implying a higher likelihood of the stock declining.
What Do Analysts Expect For SOFI Stock?
SoFi Technologies stock has a consensus “Hold” rating on Wall Street. Out of the 18 analysts covering SOFI stock, four analysts recommend a “Strong Buy,” one advises a “Moderate Buy” rating, 10 recommend a “Hold,” and three give a “Strong Sell” rating.
The average analyst price target for the stock is $9.07, indicating a potential upside of 38.7% from current price levels.
The Bottom Line on SOFI Stock
In general, I agree with the analysts’ “Hold” recommendation. SoFi shows promising future growth prospects and appears undervalued; however, the stock might continue to underperform in the short term, due to weak guidance for the current quarter and bearish sentiment in the options market.
On the date of publication, Oleksandr Pylypenko did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
