SoFi has outpaced the broader markets recently and has massive upside potential given its reasonable valuation and expanding customer base.
Aug. 8, 2022
Shares of fintech company SoFi gained significant momentum after it announced Q2 results after market close on Tuesday. In the June quarter, SoFi reported revenue of $362.5 million with an adjusted loss of $0.12 per share. Analysts forecast the company to post revenue of $346.48 million and an adjusted loss of $0.13 per share in the quarter.
SoFi also raised its guidance for 2022 and estimates sales to range between $1.508 billion and $1.513 billion. It previously forecasted revenue between $1.505 billion and $1.51 billion for 2022, while analysts estimated current year sales at $1.48 billion.
The company’s earnings and revenue beat, coupled with its better-than-expected guidance, drove SoFi stock price higher by 30% this week. Let’s see what impacted SoFi’s impressive numbers in the June quarter.
SoFi stock price is down 70% from all-time highs
In Q2, SoFi’s net sales rose by 57% year-over-year while adjusted EBITDA surged 81% to $20 million. It was the company’s eighth consecutive quarter of positive adjusted EBITDA which also doubled sequentially.
SoFi has maintained considerable momentum despite a challenging economic landscape in 2022. Anthony Noto, the CEO of SoFi Technologies, stated, “The depth and breadth of our portfolio allows us to allocate resources toward the best growth opportunities across our diverse offerings, which has enabled us to exceed our performance targets despite continued headwinds in certain businesses.”
SoFi’s top line has risen at an enviable pace over the years. Its sales have increased from $269.4 million in 2018 to $985 million in 2021. Analysts expect sales to surpass $2 billion by 2023. Despite its stellar growth metrics, SoFi’s stock price is down over 70% from all-time highs, valuing the company at $6.6 billion by market cap. So, SoFi stock is valued at a price to 2023 sales multiple of 3.2x, which is quite reasonable.
A look at the stock price forecast for SoFi
SoFi added 450,000 new members in Q2, which was its second-highest quarterly growth of members. SoFi ended Q2 with 4.3 million members, an increase of 69% year-over-year. It also added 702,000 new products, bringing its total to 6.6 million products, an increase of 79% compared to the year-ago period.
Further, SoFi’s deposits more than doubled to $2.7 billion in Q2, and it raised its maximum annual percentage yield to 1.80% in July, up from 1.5% in June. A higher quality of loans has resulted in a lower cost of funding for SoFi’s loans. It also increased the company’s flexibility to capture additional net interest margins and optimize returns.
Due to its stellar metrics, SoFi has forecast adjusted EBITDA between $104 million and $109 million in 2022.
Recently, SoFi obtained a national bank charter allowing the company to hold loans on its balance sheet for a more extended period, which should result in higher interest payments. It is also well poised to cross-sell several products to its widening base of customers, making SoFi stock a top bet in 2022 and beyond.