SoFi Technologies, Inc. (NASDAQ: SOFI), an American personal financial services company and online bank shaved off 66.52% in valuation year-to-date. Macro issues including rising inflation, the Russia-Ukraine conflict, and prospects of interest rate hikes, swayed investors from high-growth stocks to safe-havens.
Additionally, company-related headwinds such as the extension of the student loan moratorium impacting student loan origination volumes and subdued consumer demand weighed on SoFi. The halt on student loan repayments was extended from May 1 to August 31 by President Biden, in turn, impacting refinancing activities of the company as well.
Despite the short-term headwinds, SoFi’s increasing userbase and solid product offering provide long-term growth opportunities. Also, rising interest rates are likely to benefit the company on the banking side. Bullishly, SOFI won approval for its banking charter this past January.
Keeping the streak of stellar performance alive “despite volatile markets and the changing political, fiscal, and economic landscape,” recently, SoFi has reported a loss of $0.14 per share in the first quarter of 2022, in line with analysts’ expectations. Also, net revenues beat the Street’s estimates.
However, the company provided a mixed revenue outlook for the remaining period of 2022.
Following the update, shares of the company tumbled more than 12% at Tuesday’s close when results were released prior to the schedule. Nevertheless, around 1.9% was gained in the extended trading session.
Results in Detail
Total adjusted net revenues generated during the quarter grew 49% year-over-year and stood at $321.7 million against the consensus estimate of $286.36 million. Strength across all three business segments – Lending, Technology Platform, and Financial Services – drove revenues.
Interestingly, net revenues exceeded the company’s guidance of $280 million to $285 million.
Segmental Results
In the Financial Services segment, product usage more than doubled, mainly driven by SoFi Money, SoFi Invest, and Relay offerings. Additionally, Lending products surged 20% to 1.14 million on the back of consistent demand for mainly personal loans. Technology Platform accounts jumped 58% year-over-year to 109.7 million on the back of new client additions and a rise in existing clients.
Financial services net revenue of $23.5 million rose 264% year-over-year. Additionally, the Lending segment’s adjusted net revenues stood at $244.4 million, up 45% year-over-year, while adjusted net revenues in the Technology Platform segment grew 32% to $61 million.
Other Metrics
Adjusted EBITDA came in at $8.7 million, reflecting the seventh consecutive quarter of a positive figure.
During the quarter, total members surged 70% year-over-year to 3.9 million, marking the third-largest member growth, with new member additions at about 408,036. Additionally, total products jumped 86% to 5.9 million from 3.2 million and represented the second-highest product growth ever. New product additions came in at 688,940 in the first quarter.
CEO’s Comments
Encouragingly, the CEO of SoFi, Anthony Noto, said, “Our strong momentum in member, product and cross-buy growth also reflects the success we have achieved in building the SoFi brand over the last year. We committed to investing more in product and brand marketing once we reach the appropriate scale and unit economics last year.”
Guidance
For the second quarter of 2022, the company projects adjusted net revenue to be in the range of $330 million to $340 million, representing a growth of 39% to 43% year-over-year. The consensus estimate is pegged at $342.23 million. Adjusted EBITDA is expected to land between $5 million and $15 million.
For 2022, the company expects adjusted net revenue of $1.505 billion to $1.510 billion, versus analysts’ expectations of $1.47 billion. Adjusted EBITDA is anticipated in the range of $100 million to $105 million.
Wall Street’s Take
Following the first-quarter results, Bank of America Securities analyst Mihir Bhatia maintained a Hold rating on the stock and lowered his price target to $7 (33.33% upside potential) from $12.
According to Bhatia, though the company posted strong results, guidance was modestly tweaked.
The rest of the Street is cautiously optimistic about the stock, with a Moderate Buy consensus rating based on seven Buys and five Holds. The average SoFi price target of $13.95 implies 165.71% upside potential from current levels.
Website Traffic
TipRanks’ Website Traffic Tool which uses data from SEMrush Holdings (SEMR) offers insight into SoFi’s performance.
According to the tool, a website traffic uptrend was visible. In Q1 2022, total estimated visits to sofi.com showed an increasing trend, on a global basis, representing a 140.24% jump from the fourth quarter and a significant 902.25% rise from the same quarter last year.
The predictions that were based on TipRanks’ website visits data turned out to be correct, with SoFi reporting strong revenues, along with robust new member and product growth, in Q1 2022.
Bottom-Line
Investors ‘buying the dips’ might consider SoFi as a prudent investment decision, as current price performance reflects that the downsides are already priced in. Also, vigilance on website trends reflected on TipRanks’ Website Traffic Tool could be a guiding factor.
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