SoFi Technologies (NASDAQ:SOFI) delivered what appeared to be strong Q1 results on Monday, but that didn’t help the stock in the two subsequent sessions, as it tumbled ~21% without any apparent reason.
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The fintech company hit plenty of the right notes in Q1. Revenue climbed by 43% year-over-year to $460 million, while beating the Street’s call by $23.22 million. Adjusted EBITDA hit $76 million, far above the fintech’s guide for $40-$45 million and improving on the previous quarter’s record haul. EPS of -$0.05 also came in better than the -$0.08 anticipated by the analysts.
As for the outlook, the company now sees 2023 adjusted net revenue in the range between $1.955-$2.02 billion compared to the previous range of $1.925-$2.0 billion. At the midpoint, that is above consensus at $1.97 billion. Moreover, SoFi raised its adjusted EBITDA forecast for the year from the prior $260-$280 million range to between $268-$288 million.
So, with all that goodness on offer, what did it take to rile investors? Oppenheimer analyst Dominick Gabriele has an idea about that.
“The key issue this quarter in our opinion is the loss of a Tech Platform partner that has moved the Galileo accounts down 3.8% QoQ,” the analyst explained. “The stock is likely reacting negatively because of guidance for flat with 1Q23 Tech Platform segment revenue next 9 months.” In fact, the quarter represented the first instance of a quarterly decline for Galileo accounts.
Given the fact the tech segment revenue valuation “remains high” and its multiple contribution is “so outsized,” Gabriele believes that the valuation can be meaningfully impacted from just “small changes in tech expectations.”
That, however, should not detract from SoFi’s achievements in the quarter. “SOFI had a terrific quarter and is executing extremely well,” the analyst went on to say. “So well that they keep absorbing various revenue headwinds while raising guidance. Given the selloff, we again see limited downside to shares.”
All told, then, Gabriele reiterated an Outperform (i.e., Buy) rating on SOFI shares, while his $7 price target implies ~28% upside potential from current levels. (To watch Gabriele’s track record, click here)
Elsewhere on the Street, SoFi garners an additional 5 Buys and 1 Hold, all coalescing to a Strong Buy consensus rating. The average target currently stands at $8.50, suggesting the shares have room for growth of ~73% over the coming year. (See SOFI stock forecast)
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Disclaimer: The opinions expressed in this article are solely those of the featured analyst. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.
