Investing

SoFi's Stellar Fourth-Quarter Earnings Beat Confirms Positive Business Momentum For 2023

Ben Ward

Published: January 31, 2023 3:22 am

Last Updated: January 31, 2023 12:25 pm

Personal finance fintech SoFi Technologies (US:SOFI) began the trading week with a 12.5% gain on Monday after reporting fourth quarter results which showed continued positive momentum.

For the final quarter of 2022, SoFi reported continued growth in sales and tracked closer towards profitability. SoFi generated GAAP net revenues of $456.68 million for Q4, which grew from $423.99 million in Q3 and was ahead of analyst forecasts of around $425 million.

On an adjusted view, net revenue grew from $423.99 million in Q3 to $456.68 million in Q4.

Underlying profits measured by adjusted EBITDA grew from $44.30 million in the third quarter to $70.06 million and beat consensus forecasts of $43 million by 62%.

The group’s net loss improved significantly from -$74.21 million in Q3 to -$40.00 million in Q4, equating to an EPS loss of -5 cents per share. The EPS figure was well ahead of analyst estimates of -9 cents per share.

The positive business performance was supported by new member additions of around 480,000 and new products added of over 695,000.

With the year now ended, SoFi’s CEO Anthony Noto provided an updated outlook picture with guidance for 2023.

Noto expects SoFi to generate adjusted net revenue of $1.925 to $2.0 billion, representing growth of 25-30% over the year. Adjusted EBITDA is expected to fall within the range of $260 to $280 million, posing 82-96% growth over the year.

The company also expects to reach quarterly GAAP net income profitability by Q4 of 2023 with incremental margins of 20% for the year.

The push for SOFI to become profitable has been a common theme among growth stocks with stretched valuations over the last 12 months, following FED Powells rate hiking cycle to curb inflation.

Charts provided from Fintel’s forecast page for SOFI show the bullish forward forecasts for both revenue and EBITDA through to 2027.

Analysts are collectively expecting the company to generate $1 billion in EBITDA by the end of 2026.

Oppenheimer & Co analyst Dominick Gabriele raised estimates for his ‘outperform’ after the result with management’s guidance and believes it is achievable even with some moderation in personal loan origination growth.

Gabriele highlighted that SOFI is still charging ahead on deposit growth and has additional avenues for growth even through a down-cycle.

Oppenheimer expects shares to remain volatile but notes that SOFI is one of the few companies with accelerating business lines and improving margins. As a result, the institution increased its price target from $6 to $7.

On average, Fintel’s consensus target price of $7.48 suggests the stock could see a further 12% upside over 2023.

SoFi has risen 6 ranks in popularity this week and is currently the 14th most held security by retail investors that have linked their portfolio for free with the Fintel platform.

Fintel also reported that SOFI’s CEO Anthony Noto bought $5 million worth of the stock in December.

The stock lacks interest from the institutional side of the market, explained by a weak Fintel Fund Sentiment Score of 31.11. This weak score ranks SOFI in the bottom 25% of 36,676 globally screened companies ranked on institutional buying activity.

So who is bearish on the stock currently?

There are several funds that are currently short SOFI.

The Neuberger Berman Long Short Fund has the largest reported net short position of -$11.5 million in the stock and paid $5.98 on average for the trade.

Boston Partners Long/Short Research Fund has a reported short value of -$2.02 million in the stock.

Blackstone’s Alternative Multi-Strategy Fund makes the top 3 with a net short value of -$1.39 million.

This article originally appeared on Fintel