New SoFi Price Target After Another Record Quarter

The report was solid. The markets are not impressed. Let's get into it.

On Wednesday morning, $10K Portfolio holding and Sarge-fave SoFi Technologies (SOFI) released the firm's first quarter financial results. For the period ended March 31, SOFI posted a GAAP EPS of $0.12 on revenue of $1.1 billion. While the bottom-line print met expectations, the top-line number both beat consensus and was good enough for year-over-year growth of 43%.

Net income attributable to shareholders grew 134% to $167.1 million, while adjusted EBITDA increased 62% to $339.9 million. The market is punishing SOFI on Wednesday morning, but it's hard to sneeze at a stock that's putting up 43% sales growth that produced 134% growth in net income, 62% growth in adjusted EBITDA and 100% earnings growth. Really? You want to sell that stock? I know that I don't.

CEO Anthony Noto commented in the press release:

“We had an excellent Q1 delivering another quarter of durable growth and strong returns, fueled by our relentless focus on innovation and brand building. Members grew 35% and products increased 39%, with 43% of new products coming from existing members, as more people choose SoFi as their trusted partner for major financial decisions and all the days in between. Our strategic entry into new areas like digital assets alongside the strong growth in our existing businesses are strengthening and diversifying our platform. That allows us to keep investing in better products and experiences for our members and clients and powering our compounding growth and strong returns over the long-term.”

Just an FYI, the firm reached record numbers yet again for new members and products.

Segment Performance

Financial Services generated net revenue of $428.5 million (+41%) as net interest income grew 31% and non-interest income grew 55%. Provision for credit losses was up 58% to $8.9 million, while contribution to profit increased 32% to $195.6 million on a contribution margin of 46% (down from 49%).
Technology Platform generated net revenue of $75.1 million (-27%) as net interest income grew 14% and non-interest income dropped 27%. Contribution to profit decreased by 61% to $12 million on a contribution margin of 16% (down from 30%).
Lending generated net revenue of $642.4 million (+55%) as net interest income grew 39% and non-interest income grew 170%. Contribution to profit increased 60% to $382.4 million on a contribution margin of 60% (up from 58%).

Guidance

For the current quarter, the firm is projecting revenue growth of 30%, adjusted EBITDA margin of 30% and adjusted net income margin of 12% to 13%. Wall Street was looking for revenue growth closer to 32%. That hurt a bit.

For the full year, SOFI sees adjusted net revenue of $4.655 billion, producing adjusted EBITDA of $1.6 billion, adjusted net income of $825 million and an adjusted EPS of $0.60. Wall Street was looking for revenue of $4.65 billion and a non-GAAP EPS of $0.60. These numbers matched or slightly exceeded expectations.

The fact that this was a reaffirmation of previously issued guidance and nothing more certainly hurt the share price. Investors had apparently been looking for an increase though Wall Street was not. Wall Street was looking for full-year revenue of $4.65 billion and an adjusted EPS of $0.59.

My Thoughts?

I am thinking that I will be buying shares of SOFI on this weakness. The shares are down more than 12%. Given the elite level of execution for the quarter and the fact that the guidance is not disappointing. but in my opinion, simply conservative, I will be adding both to this portfolio's long position and to my long position in the Sarge-folio. That said...

The stock has obviously suffered some technical damage. Losing the 50-day SMA loses some institutional support. Losing the 21-day EMA will lose some swing-trader type support. Within the daily MACD, the drop of the nine-day EMA below zero and the drop of the 12-day EMA below the 26-day EMA will cause some algorithmic panic. That's likely what we are seeing right now. This is why I have to make the 50-day line close to $18 my pivot, which impacts my target price.

SoFi Technologies

Target Price: $23

Pivot: 50-day SMA (currently close to $18)

Add: Now and possibly over the coming days

Panic: Loss of early April low ($14.93)

Upcoming Portfolio Earnings

-Palantir Technologies (PLTR) : after the closing bell, Monday, May 4 (Star Wars Day).

-Ocular Therapeutix (OCUL) : ahead of the opening bell, Thursday, May 5.

-Snap (SNAP) : after the closing bell, Friday, May 6.

Tuesday's Intention vs Tuesday's Actual Trade

Intention: Purchase 100 shares of (BBBY) at or close to the last sale.

Actual Trade: Purchased 100 shares of BBBY at $5.05.

Wednesday's Intentions

As mentioned above, I intend to add to the portfolio's long position in SOFI and possibly again in the coming days.

Intention: Purchase 25 shares of SOFI at or close to the last sale of 15.92.

Current Positions

Long 100 shares of BBBY at $5.05. Last sale: $4.78.

Long 50 shares of (EVLV) at $6.0898. Last sale: $6.90.

Long 25 shares of (MBLY) at $8.92. Last sale: $8.83.

Long 150 shares of OCUL at $8.305. Last sale: $9.30.

Short one OCUL $12 June 19 call at $0.65, Last sale: $0.55.

Long 125 shares of (ONDS) at $9.4749. Last sale: $9.56.

Short one ONDS $13 June 19 call at $0.84. Last sale: $0.53.

Long 10 shares of (PL) at $37.18. Last sale: $33.40.

Long 10 shares of PLTR at $141.29. Last sale: $136.83.

Long 10 shares of (RKLB) at $65.173. Last sale: $75.40.

Long 125 shares of (SIDU) at $2.725. Last sale: $2.97.

Long 100 shares of SNAP at $5.9034. Last sale: $5.91.

Short one SNAP $7 June 19 call at $0.45, Last sale: $0.33.

Long 150 shares of SOFI at $15.9875. Last sale: $15.92.

Long 40 shares of (VELO) at $10.93. Last sale: $12.41.

Cash: $682.46

Portfolio Value: $10,477.37, +4.8% from inception on March 24.

At the time of publication, Guilfoyle was long BBBY, EVLV, MBLY, OCUL, ONDS, PL, PLTR, RKLB, SIDU, SNAP, SOFI and VELO.