Anthony Noto, chief executive of SoFi Technologies, used one word to describe 2023: "remarkable."
This was in January, when Noto was speaking to analysts about the online financial-services company's full-year and fourth-quarter results.
“We achieved multiple records and realized many of our aspirations despite seismic geopolitical and macroeconomic events,” he said during a conference call.
SoFi — a short form of Social Finance — beat Wall Street's fourth-quarter expectations, earning 2 cents a share on adjusted revenue of $594.3 million. Analysts surveyed by FactSet expected the company to break even on a per-share basis and post revenue of $575 million.
The company’s student-loan business saw origination volume nearly double year-over-year to $790 million. (The figure declined 14% from Q3.)
For the year-earlier fourth quarter, SoFi posted a loss of 5 cents a share on revenue of $443.4 million.
"We demonstrated that we have built a business to thrive in a host of challenging environments, reacting swiftly to change, driving our business forward with standout financial performance, while continuing to serve our member’s needs," Noto said.
The former U.S. Army Ranger, who was Twitter's chief financial officer before he took over at SoFi, oversaw the company’s initial public offering in 2021.
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SoFi sued US Education Department, dropped case
However, SoFi also saw some controversy last year.
In response to the 2020 COVID pandemic shutdown, Congress passed legislation that allowed holders of federal student loans to stop making payments without any financial penalty. The program was extended nine times.
In March 2023, SoFi, which has around $1 billion in revenue from private student loans and other offerings, sued the U.S. Department of Education to end the agency’s pause on federal student loan payments.
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The company said it had lost $150 million to $200 million of profit since the moratorium started and maintained that the pause had no legal basis.
The Department of Education stated that the lawsuit was “an attempt by a multibillion-dollar company to make money while they force 45 million borrowers back into repayment — putting many at serious risk of financial harm.”
SoFi later withdrew the lawsuit.
In March, SoFi said it planned to raise $750 million by issuing convertible senior notes. The company also said it entered into agreements with certain holders of existing convertible notes to exchange them for shares.
“We did this deal from a position of strength,” CEO Noto told CNBC’s Jim Cramer on March 20. "What we saw was an opportunity to lower our cost of debt.”
Noto said the company “saw it as an opportunity to do it and have a negligible impact on GAAP earnings per share and also, combined with a buyback, have it be accretive to tangible book value per share by 8% to 10%.”
“The reason why we did it is really important because I think this is what will put some momentum back into the stock,” he added.
SoFi set to report Q1 results April 29
SoFi is scheduled to report first-quarter results on April 29. FactSet calls for the company to earn 1 cent a share on revenue of $557 million.
Several analysts have been adjusting their stock-price targets for SoFi, including Citi analyst Ashwin Shirvaikar, who resumed company coverage on April 8 with a buy rating and an $11 price target.
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The analyst said the renewed buy rating with a high-risk designation is based on an updated financial model that includes the latest annual report data and recent capital markets transactions.
SoFi expects to save $40 million to $60 million in annual interest expense and dividend payments by using its issue of convertible senior notes to pay down higher-cost instruments.
Citi said that its fundamental bullish view on SoFi remains unchanged as the company's intended business diversification comes into focus, its ability to attract deposits continues to prove itself, and investors focus on forward profitability.
On April 6 Keefe, Bruyette & Woods analyst Timothy Switzer raised his price target on SoFi stock by 15% to $7.50 a share in January, the research firm lowered its price target to $6.50 from $7.50.
Switzer said he still was concerned about earnings risk over the long term, but the risk of near-term negative catalysts had been reduced due to the stock’s more than 20% decline in 2024 and the company's recent capital raise.
On April 3, Needham analyst Kyle Peterson initiated coverage of SoFi stock with a buy rating and a $10 price target.
The analyst told investors he viewed the company “as a long-term winner in the digital lending/neobank space.”
Peterson said this was due largely to its focus on prime and super-prime consumers and its possession of a full banking license. Those two factors, he said, give SoFi "superior unit economics compared to other consumer-finance platforms that focus on lower-income borrowers and/or lack a banking license.”
SoFi shares were trading at $9.65 on Jan. 2. At last check they were up 2.6% to $7.64.
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