SoFi Technologies: Earnings and Growth Prospects

When SoFi Technologies reports earnings Monday morning, investors will be eagerly anticipating the possibility of the company achieving its first quarterly profit.

The fintech giant has previously expressed its expectations to report its first profit in the 2023 fourth quarter, based on generally accepted accounting principles. However, analysts remain slightly less optimistic, predicting earnings to break even according to FactSet. Wall Street has also estimated a revenue of $572 million for the period, a significant increase compared to the $443 million recorded in the year-ago quarter.

SoFi, originally established as a debt refinancing lender, has now diversified into three distinct segments: lending, which covers student, personal, and home loans; financial services; and a technology platform.

While student loan origination dominated the headlines last year following the lifting of the moratorium on student loan payments, attention has since shifted towards SoFi's non-lending segment. CEO Executive Officer Anthony Noto believes that these non-lending businesses will drive growth into the fourth quarter of this year and beyond.

However, J.P. Morgan analysts Reginald Smith and Charles Pearce find this shift in focus somewhat perplexing. They stated in a Jan. 26 report that "Personal loan origination and loan growth is extremely accretive under SoFi's fair value accounting methods. We can't understand why the company would voluntarily put the brakes on the business with so much balance sheet capacity." Despite their confusion, the analysts have maintained a Neutral rating and a $10 price target on the stock, citing near-term pressure and concerns about credit trends and 2024 guidance. However, they also noted that they view SoFi as a long-term winner in the neo/digital bank space.

Mizuho analyst Dan Dolev also highlighted several factors to watch in the upcoming report, such as the number of loans sold and the sale prices. Mizuho rates the stock as a Buy, with a price target of $12.

Over the past 12 months, SoFi stock has experienced a 28% increase.