Anthony Noto, CEO “Our first quarter was an exceptionally strong start to 2024, demonstrating significant momentum as we responsibly grow revenue and diversify toward our Financial
Services and Tech Platform segments, sustain profitability, reinforce our balance sheet, and grow our member base.”
To check out my full Sofi thesis – Follow this link
Overview
Another strong quarter for the company and my thesis remains intact. Noto continues to execute despite his somewhat bearish views of the market.
You can find the full earnings deck release here.
You can find the financial reports here.
Highlights
Beat revenue estimate by 3.8% and guide by 4.6%
Beat EBITDA estimates by 23.2% and guide by 25.5%
Beat GAAP EPS estimate by $0.01.
Beat GAAP net income guide.
Updated Vizual Summary Charts
Here’s what I like:
• Member count still grinding higher. Up 20% YoY
• Products climbing higher still. Lending up 20% YoY and financial services up 42% YoY
• Net income still improving.
• Cash pile growing
• Debt shrinking – Thanks to the senior notes offering.
• Cash is now higher than debt, love to see that.
• Galileo accounts still edging higher.
• Loan originations still growing overall. Expecting home loans to move more as rates fall.
Here’s what I don’t like:
• Revenue from lending down more than I would like but given their outlook on the economy, its not a concern for me at this point.
• Growth vs top banks also falling, but still outpacing.
Key Charts
Here’s what I like:
• SBC continues to come down.
• Net deposits up, slowly but surely. Would prefer to see this pop more though.
• Operating leverage is picking up pace against expenses.
• Total assets continue to grow nicely.
Here’s what I don’t like:
• Defaults are starting to create an upward trend.
• Charge offs have also increased a lot. Would very much like to see this start to decline soon.
Guidance
Sofi s expected to maintain an upward trend in revenue whilst maintaining profitability. Not too sure where the Ebit estimate is coming from though… Will look more into that.
We can take a more detailed look at guidance on the earnings deck though.
We expect to deliver:
● Financial Services net revenue growth of more than 75% versus 2023 levels
● Tech Platform net revenue growth of 20% versus 2023 levels
● Lending adjusted net revenue at 92-95% of 2023 levels
● GAAP Net Income of $165 – $175 million*
● Adjusted EBITDA of $590-600 million
● GAAP Diluted EPS of $0.08 – $0.09 cents
● $800 million – $1 billion of Tangible Book Value growth
● Total Capital Ratio over 16% at year end
Guidance is a little soft across the board, especially for Q2. Signalling a rather sharp drop off in revenue growth. Which the market wasn’t very thrilled about. I’m attributing this to Noto’s cautious outlook. We also see this in the bolstering of their capital ratio, but hesitation in putting it to use. Instead of making a push on lending, they seem to be keeping it as an available buffer, should the economy start to suffer.
Activity
This data is a little lagging but shows insiders still buying up more than selling. Short interest is also dropping. Realistically how much more can the shorts want to gain from this stock? Institutional ownership continues to rise, but we can get a more detailed look at this below.
Balance Sheet Summary
What a difference a year makes.
The Charts
Rather aggressive sell off given the numbers that Sofi put up. Continuing to bleed for a second day as the broader market pulled back prior to the Fed rate decision and some bad macro jobs data.
Price now has a few gaps above to fill, given enough time it will. Retail traders still control the lion share of the daily flow on this one though. I want to see a more big fish coming into this and I’m very confident that will happen. Unfortunately I can’t provide a timeframe for this.
This area blue resistance line would be a nice spot to bounce. Beneath this is a rather large volume void at around $6. This would be an excellent place to load up on more shares.
Conclusion
There’s a lot of sentiment headwinds for them right now, with being a newer ”bank” they get lumped in with regionals. The day before earnings we had a regional bank collapse that likely didn’t help the sentiment here. On top of that we get weak guidance and talk of a rough macro environment. No surprise we get investors shaken out of the stock.
I still love Sofi and have strong conviction in it. I believe its very cheap right now and should have no trouble getting over $12, though I can’t provide a timeframe for this. When Noto feels confident the economy is improving I believe we will see some big moves, and with the high short interest, its going to be explosive when it happens. For now i just want to see continued growth in the tech platform and financial services. Ideally more upside in lending too.
