SoFi Just Posted Record Growth and Profitability -- So Why Is the Stock Down 10%?
Key Points
SoFi reported second quarter revenue, membership growth, earnings, and more that were higher than ever.
Despite the strong numbers, the fintech stock dropped by nearly 10% after the announcement.
Near-term profitability concerns seem to be overshadowing an otherwise stellar quarter.
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SoFi (NASDAQ: SOFI) just reported its second-quarter earnings, and the numbers look generally strong. In fact, the company posted all-time records for member growth, revenue, and several other key metrics.
Despite the solid earnings report, SoFi's stock fell by about 10% in reaction to the report. Here's a look at some of the most important numbers from the second quarter, and why the stock may be falling despite the strong results.
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Image source: SoFi.
A record-setting quarter
On the top line, SoFi reported $1.2 billion in net revenue, up 43% year-over-year and well ahead of analyst estimates. Earnings per share came in at $0.12, also significantly above estimates.
Adjusted EBITDA grew by 44% to an all-time high and represented the 19th consecutive "rule of 40" quarter for the company, showing that the company's track record of profitable growth is still intact.
During the second quarter, SoFi added 1.1 million members (the highest single-quarter total yet), and now has 15.8 million people in its ecosystem. More importantly, SoFi's cross-buying success is accelerating. 51% of all new products were opened by current customers, up from 43% in the first quarter and 35% a year ago.
Additionally, SoFi's loan originations reached an all-time high of $14.8 billion, with solid growth across personal, student, and home loans. Despite the growth, credit quality improved, with SoFi's annualized personal loan charge-off rate down 21 basis points year over year.
Why is SoFi's stock down?
As far as the second quarter results go, there isn't much to dislike. But one potential reason for the negative reaction is concern about SoFi's profitability. On one hand, management raised revenue guidance for the full year. But on the other hand, guidance for adjusted EBITDA and earnings per share was held constant. In other words, shouldn't more revenue mean more profit as well?
In a CNBC interview following the earnings announcement, SoFi's CEO, Anthony Noto, said that the bank's expectations have shifted to two rate hikes this year (compared with two rate cuts at the beginning of the year), which has made the company hesitant to raise EPS guidance.
After today's decline, SoFi stock trades at its lowest price-to-book valuation in more than a year and at 23 times forward earnings, a rather low multiple given the company's top-line growth rate of more than 40%.
In a nutshell, this was an extremely solid quarter overshadowed by near-term profitability concerns. If you're a believer in the long-term potential of SoFi's business, now could be a smart time to take a closer look.
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Matt Frankel, CFP® has positions in SoFi Technologies. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
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