The people at SoFi Technologies (SOFI) know all about April showers.
The online personal finance company got some pretty harsh treatment late last month while reporting first-quarter earnings.
Related: Analyst updates SoFi stock outlook after earnings
While SoFi beat Wall Street's earnings and revenue expectations, the San Francisco-based business offering disappointing guidance for the second quarter.
“We expected that 2024 would be an important year of transition,” CEO Anthony Noto told analysts during the company’s earnings call. “Heading into this year, we had a conservative outlook given interest rate volatility, industry liquidity, inflation and macroeconomic environment concerns."
Investors dumped SoFi on April 29 and the stock fell 10%. Shares are down roughly 30% year-to-date.
SoFi—short for Social Finance—offers several financial products, including student loan refinancing, mortgages, personal loans, credit cards, investing, and banking, through mobile app and desktop interfaces.
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Concerns about slower SoFi loan growth
Wedbush analysts, who rated SoFi stock underperform with a $4 price target, said at the time that "there were several offsetting negatives" with the earnings report.
The firm said the rating was based on analysts' belief that loan origination and sales fee income may be pressured over the next 12 months as balance sheet loan run-off increases at a faster pace than new loan origination volume.
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Also, the firm said, "we believe balance sheet capacity for loan growth could be reached in 1H 2024 as the company's total capital ratio appears to be at the company's comfort level."
Slower loan growth in 2024-2025 could lead to materially slower revenue growth relative to 2021-2023, the firm said, and "credit quality has been weakening and we expect it may continue to weaken given the macro backdrop, which could negatively impact SoFi's fair value marks."
The company reported first-quarter earnings of 2 cents per share up from a loss of 5 cents a share a year ago, and beating the FactSet consensus for one cent per share.
Net revenue totaled $581 million, up from $460 million a year ago, surpassing FactSet's call for $555.3 million in sales.
New member additions amounted to 622,000 during that quarter, bringing total membership up to more than 8.1 million individuals, showing growth of almost 2.5 million new members over 12 months.
SoFi said the tech platform and financial services segments together are expected to drive growth and increase from 38% of total adjusted net revenue in 2023 to roughly 50% for the full year of 2024.
It also forecast adjusted second-quarter revenue between $550 million and $565 million and net income of $5 million to $10 million.
Analysts surveyed by FactSet had called for $580.8 million in revenue and net income of $13.9 million.
For the full year, the company called for adjusted revenue of between $2.39 billion and $2.43 billion, compared with earlier guidance of $2.37 billion and $2.41 billion.
Earlier this month, Deutsche Bank analyst Mark DeVries said the firm hosted Sofi management for a day of investor meetings.
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He said the some of the focus was on the areas of confusion from first-quarter results that weighed on the stock last month, "but where more of the attention was on the business drivers that are key to long-term revenue growth and multiple re-rating, particularly for the technology segment."
Analyst cites 'bearish descent' for SoFi
"We continue to rate SoFi hold due to uncertainty around near-term catalysts for this volatile stock," he said. "We walked away from the meetings incrementally constructive on their prospects for significant wins in technology that could boost revenue growth in 2025 and beyond and help shift the narrative."
On May 21, the San Francisco-based company said it had place a $350 million personal loan securitization exclusively with funds and accounts managed by PGIM Fixed Income, a Prudential Financial (PRU) company.
“We’ve continued to see healthy demand for our personal loan sales, providing us access to new forms of capital as SoFi helps more members get their money right,” Noto said in a statement.
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Noto, a star linebacker on West Point’s football team, is a former U.S. Army Ranger, who was once the chief financial officer of the National Football League, who became the CFO of Twitter, now known as X.
He took helm at SoFi and initiated the company's IPO in 2021.
“PGIM’s experience as an asset-based finance lender, coupled with its established securitized product platform, makes the company a great partner for SoFi as we continue to strengthen our lending capabilities,” he added.
To date, SoFi said that it has sold over $15 billion and securitized over $14.5 billion of personal loan collateral, underscoring the high quality of its personal loan portfolio.
Wall Street trader doubles-down on SoFi Technologies
TheStreet Pro's Stephen Guilfoyle has served as the chief market economist for Stuart Frankel & Co., the U.S. economist for Meridian Equity Partners, and as a vice president in block trading and investment banking with Credit Suisse over the years.
A hybrid stock analyst who blends fundamental and technical analysis, Guilfoyle said recently that SoFi "has been trying to break out of a bearish descending triangle to the upside since late April."
A technical analysis formation, bearish descending triangles occur when shares make a series of lower highs (descending) that are above a horizontal series of prior lows (the base of the triangle).
Also Read: SoFi's Down, the CEO's Buying and So Am I
He said the second-quarter guidance "was mildly problematic, which could be adding to recent weakness in the share price."
"Even though the [increased] full-year forecast was made at the same time, this could be spooking a few investors, especially if they think that print might land on the light side," Guilfoyle added.
Guilfoyle thinks recent weakness in SoFi stock could present an opportunity for buyers, pointing out that Noto has bought more shares on the drop.
Specifically, Noto purchased another 28,775 shares of common SoFi stock on May 3 for a little less than $200,000, bringing his personal stake up to more than 8.03 million shares.
"I always watch for CEOs who put their own money on the line when a stock trades lower," Guilfoyle said. "I am willing to add from here down to the $6.61 low of late April (I did add very close to that spot on that day). Should that spot crack, I would pause, but not panic."
Guilfoyle says that a move above $7.92 would trigger a SoFi stock price target of $7.92, while a close below $6.40 "is where I would consider lightening up if need be."
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