SoFi stock soars after company hits major milestone

SoFi Technologies (NASDAQ: SOFI) stock flew higher on Monday after the company posted fourth-quarter earnings and revealed a major milestone. In fact, not only did the fintech beat earnings estimates, but it also posted positive quarterly net income for the first time since it went public in 2021.

Shares of SoFi were up by as much as 23% in morning trades on Monday, blasting past $9 per share.

SoFi makes a quarterly profit for the first time

The headline number for SoFi in the quarter was $48 million, which was its net income for the quarter. As already stated, this is the first time the company has posted a quarterly profit since it went public, and it compares to a $40 million net loss in the fourth quarter of 2022.

SoFi’s profitability was fueled by record revenue, as its net revenue climbed 35% in the quarter to $615 million with adjusted net revenue of $594 million. Both earnings and revenue topped estimates. It was the 11th straight quarter that the firm has posted record adjusted net revenue.

SoFi added 585,000 new members, or customers, boosting its total to 7.5 million. That is up 8% from the previous quarter and 44% year over year. The company also added 695,000 new products in the quarter, bringing that total to 11.1 million, which is up 41% year over year. Products refers to the products on its platforms that its members use.

The fintech has three primary business lines, and all of them saw record revenue in the quarter. The lending business SoFi’s largest business, which includes personal loans, home loans and student loans. The company saw loan originations increase by 45% in the quarter with gains across the board. Its personal loans jumped 31% to $3.2 billion while its student loans rose 95% to $790 million, boosted by the lifting of the student loan repayment moratorium. Home loans increased 193% to $309 million.

What sets SoFi apart from other fintechs is that it has a bank charter, which allows it to take deposits and decreases its lending costs. That helped it increase its net interest income by 43% year over year to $263 million.

The other thing that sets SoFi apart is its two non-lending businesses. Through its Technology Platform, it enables other companies to provide banking as a service. SoFi’s technology segment saw its revenue climb 13% year over year to $97 million, as it added 11% more new client accounts.

The third leg of SoFi’s business is its Financial Services business, in which it offers investing, banking products, brokerage, credit cards and other financial services. This segment saw its revenue surge 11% in the quarter to $139 million. Both the Technology and Financial Services segments reported record revenue in the quarter.

Outlook for continued earnings growth through 2026

SoFi also posted guidance for the first quarter and an outlook for 2024. In the first quarter, it expects another quarter of net income, targeting a range of $10 million to $20 million. That would be up from a net loss of $34 million in the first quarter of 2023.  

SoFi management also projects $550 million to $560 million of adjusted net revenue in the first quarter of 2024, up from $460 million in the year-ago quarter, and adjusted EBITDA of $110 to $120 million, up from $76 million in Q1 of 2023.

For the full year 2024, SoFi management expects more growth from the Tech Platform and Financial Services segments, with each expected to grow its revenue by 50%. Further, they expect the firm’s lending revenue to be at 92% to 95% of 2023 levels — with expenses roughly flat compared to 2023.

Ultimately, SoFi anticipates full-year net income in the range of $95 million to $105 million, or 7 cents to 8 cents in earnings per share. Further, it targets 2.3 million new members in 2024, or 30% growth.

Longer term, SoFi management is expecting 20% to 25% compound annual revenue growth through 2026, including 50% compound annual growth for Financial Services, mid-20% compound annual growth for its Technology Platform division, and mid-teens compound annual growth for its Lending segment.

These numbers would drive SoFi’s earnings to between 55 cents and 80 cents per share in 2026. Beyond 2026, SoFi sees 20% to 25% EPS growth, reflecting continued growth of its core businesses and revenue from new business lines launched in the 2024-to-2026 time frame.

It is easy to see why investors were so enthused about SoFi’s prospects. Investors had long been waiting for SoFi to turn a profit, and it looks like it is sustainable.