Why SoFi Technologies Stock Dropped 10% on Earnings Monday

Shares of SoFi Technologies (SOFI -9.28%) nose-dived 9.9% through 12:15 p.m. Monday even after the company reported an earnings beat this morning.

Heading into the first quarter of 2024, analysts forecast SoFi would earn just $0.01 per share on $556 million in quarterly sales. In fact, profits were twice what were expected at $0.02 per share, and sales came in strong at $645 million. But the stock is still down.

The first-quarter earnings report

Sales for the first quarter surged 37% year over year, which is a nice start. SoFi also flipped from a year-ago loss to a profit. Total deposits at the internet bank rose 16% to a record $3 billion, and its customers are now ranked as “high quality,” with a median FICO score of 774, making them good candidates for loans. (The company’s net interest margin is a strong 5.9%).

All of that sounds great. Where things turned bad was on guidance.

Is SoFi stock a sell?

Management forecast 2024 revenue will grow faster than expected, to about $2.4 billion, with higher earnings as well — at least $0.08 per share, as calculated according to generally accepted accounting principles (GAAP). The problem is that in the second quarter, SoFi said revenue will only be $555 million to $565 million, whereas Wall Street wants to see revenue of $580 million.

That seems to have freaked out investors, but I don’t think they need worry. Assuming SoFi hits even the low end of its target this year, it will grow revenue 89%, and earnings will grow even faster. Indeed, earnings are expected to triple in 2025, then double again in 2026, by which time the company would be earning nearly $0.50 per share.

Is $7 a share really too much to pay for a stock earning $0.50? I don’t know about you, but 14 times earnings, even two years out, seems cheap for a fintech growing as fast as SoFi is. Investors are selling SoFi stock today, but to me, it really looks like a buy.