Is SoFi Stock A Buy After Q2 Earnings Beat?
SoFi Technologies, Inc. (SOFI) offers digital financial services and operates across the three major lending segments; Technology platform; and Financial Services. The company offers student loans, personal loans for debt consolidation and home improvement projects, and home loans.
SOFI reported total net revenue of $362.53 million in the second quarter, up 57% year-over-year, supporting its stock. This exceeded $344 million consensus estimate. The company reported a net loss of $95.84 million or 12 cents per share on a GAAP basis, trimming its losses. FactSet analysts had expected a loss of 14 cents per share for the quarter. The company’s net loss and loss per share were $165.31 million and $0.48 in the year-ago quarter.
Over the past year, SOFI’s stock has fallen 56.1%. It was down 53.1% year-to-date to close its last trading session at $7.42. However, the stock is up 23.5% over the past month.
Here are the factors that could affect SOFI’s performance in the short term:
Launch of a new exchange-traded fund
SOFI entered the cryptocurrency game through the launch of its fund, focusing on NFTs, blockchain technology and the metaverse. The SoFi Web 3 ETF (TWEB) tracks the SoFi Solactive ARTIS Web 3.0 Index. The company launched the Web3 fund alongside a smart energy ETF, seeking to continue to develop its range of themed products.
Negative profit margins
SOFI’s gross profit margin of 76.37% over the last 12 months is 20.1% higher than the industry average of 63.57%. However, its trailing 12-month net income margin of 28.46% is significantly below the industry average of 28.09%. His DEER and a negative ROA of 8.25% and 2.74% compared to their respective industry averages of 11.60% and 1.20%.
In terms of price/sales futures, SOFI is trading at 4.80x, 62.6% higher than the industry average of 2.95x. The stock’s forward Price/Book multiple of 1.40 is 17% above the industry average of 1.20.
POWR ratings reflect a gloomy outlook
SOFI POWR Rankings reflect this bleak outlook. The stock has an overall F rating, which equates to a strong sell in our proprietary rating system. POWR ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.
SOFI has a quality rating of F in line with its negative profit margins. The stock also has a D rating for value, in line with its stretched valuations.
In stock 108 Financial Services (Corporate) industry, SOFI is ranked #107. The industry is rated F.
Click here to see additional POWR ratings for SOFI (Growth, Momentum, Stability, and Sentiment).
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The recent launch of SOFI’s crypto ETF could benefit the company. However, it seems that we are in the middle of the crypto winter, and given the regulations expected in the crypto market, I think the stock is best avoided now. Additionally, its dismal results and negative ROE are cause for concern.
How does SoFi Technologies, Inc. (SOFI) compare to its peers?
While SOFI has an overall POWR rating of F, one might consider looking at industry peers Forrester Research, Inc. (FORR), which has an overall rating of A (Strong Buy), and CPI Card Group Inc. (PMTS) and Everi Holdings Inc. (ERI), which have an overall rating of B (buy).
SOFI shares were trading at $7.55 per share on Friday morning, up $0.13 (+1.75%). Year-to-date, SOFI is down -52.25%, compared to a -10.43% rise in the benchmark S&P 500 over the same period.
About the Author: Anushka Dutta
Anushka is an analyst whose interest in understanding the impact of broader economic changes on financial markets motivated her to pursue a career in investment research. After…