SoFi's Slam Dunk

Am I biased on SoFi Technologies SOFI? Probably. I have been long SOFI either personally or in the former Stocks Under $10 Portfolio product. To say that I have a lot of faith in former Army Linebacker and SOFI CEO Anthony Noto would be true as well. This morning, SoFi Technologies posted a solid second quarter and raised forward looking guidance. Huzzah! Let's get to it, shall we?

SoFi posted in its second quarter an unadjusted earnings per share of $0.01, beating Wall Street by a penny, on revenue of $598.618 million (+20%) or adjusted net revenue of $596.965 million (+22%). Adjusted net revenue excludes fair value changes in servicing rights and residual interests classified as debt due to valuation inputs and assumptions changes related to the Lending segment. Bottom line (no pun intended) is that SOFI beat Wall Street's expectations at both the top and bottom lines for the quarter.

Some Nitty Gritty

Net interest income increased 42% year over year to $412.6 million, as net interest margin improved from 5.74% to 5.83%. SoFi Invest saw a 58% increase in assets under management. Adjusted earnings before interest, taxes, depreciation, and amortization for the quarter increased a whopping 80% (not a misprint) year over year to $137.9 million on an EBITDA margin of 23%.

SoFi was hot adding new members and adding new products to existing members during the second quarter. New member additions ran over 643,000 for the quarter as total membership reached nearly 8.8 million by quarter's end. That number is up 41% from the year-ago comparison.

Product additions ran over 946,000 for the quarter, reaching nearly 12.8 million,which was up 36% from the year-ago comparison or up an adjusted 43% when excluding digital assets accounts related to the firm's transfer of crypto asset services in 2023.

Segment Performance

Lending: Total segment origination volume increased 22%. Personal loan record originations of $4.2 billion were up 12% year over year and up 28% sequentially. Student loan volume was up 86% year over year, but down 2% sequentially. Home loan volume was up 71% year over year and up 24% sequentially. Contribution profit improved 8% to $197.938 million.

Technology: Total segment net revenue increased 9% year over year. Noninterest income increased 8% as a small amount of net interest income grew out of nothing for the year ago quarter. Contribution profit improved 82% to $31.151 million as total accounts increased 23%.

Financial Services: Total segment revenue increased 80% year over year to a new record $176.1 million. Net interest income popped 87%, while noninterest income grew 58%. Contribution profit grew to $55.22 million from a loss of $4.347 million.

The CEO

Anthony Noto credited SoFi's "relentless" focus on product innovation and member growth for the strong results, adding that the company's "one-stop shop strategy continues to deliver strong, diversified growth and profitability, despite macroeconomic volatility."

SoFi's Financial Services and Tech Platform segments now make up 45% of adjusted net revenue, up from 38% a year ago and 32% two years ago, said Noto. In the second quarter, these businesses grew revenue by a combined 46% year over year.

Guidance

For the current quarter, the company expects to generate adjusted net revenue of $625 million to $645 million, with Wall Street looking for something around $611 million. Adjusted net EBITDA is seen at $160 million to $165 million, with net income of $40 million to $45 million. That would work out to a unadjusted EPS of $0.04, which is a penny more than Wall Street was looking for.

For the full year, SOFI now expects to drive adjusted net revenue of $2.425 billion to $2.465 billion, which is up from prior guidance of $2.39 billion to $2.43 billion. Wall Street was looking for $2.41 billion. Implied revenue growth for the year is now 17% to 19% up from 15% to 17%.

Adjusted EBITDA is now projected at $605 million to $615 million, on an EBITDA margin of 25%, up from prior guidance of $590 million to $600 million. Net income is now seen at $175 million to $185 million, up from prior guidance of $165 million to $175 million, and GAAP full year EPS is seen at $0.09 to $01.10, up from prior guidance of $0.08 to $0.09. Wall Street was looking for $0.08.

My Thoughts

What's not to like? SoFi beat expectations, while posting a third consecutive profitable quarter. Growth is stable to strong to very strong across all metrics. That includes membership, products and segments. Even more impressive than the results, is the guidance. The current (3rd) quarter is projected to be strong, while the year in full just keeps improving.

I wrote to readers a short note covering both SoFi Technologies and Palantir Technologies PLTR a couple of weeks ago ahead of earnings. Regular readers will recognize the chart. SOFI broke out of a descending wedge (which is a bullish pattern of reversal) in early July, retaking its 50-day simple moving average at that time.

Since then Relative Strength has solidified, as the daily moving average convergence divergence oscillator has managed to keep all three of its components in positive territory over the past two "base of consolidation building" weeks. This morning, the stock has made another attempt at its 200-day SMA. So far, the attempt has failed. Just don't want to create a smallish double top today. That could play out bearishly at least short-term.

Regardless, SOFI remains a name of conviction in my book. Remember, on nearly every dip, CEO Anthony Noto has been buying shares for his personal account since he got here. He has been in the trenches with the investors.

SoFi Strategy

Target Price: $9.50 (up from $8.75)

Pivot: 200-day SMA

Add: Down to 50-day SMA

Panic: Break below unfilled gap down to $6.60.

At the time of publication, Guilfoyle was long SOFI, PLTR equity.