Stock of Sofi Jumps 20% as Earnings Bring a Number of Positive Surprises

SoFi Technologies Inc. experienced a notable surge of 20% in its share value during Monday morning trading, following its financial report that exceeded expectations for the latest period and raised its earnings outlook for the full year.

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The company also disclosed that it had made $340 million in whole-loan sales, a move that was well-received by Wall Street, especially after concerns emerged from the previous earnings report regarding a lack of loan sales.

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Despite this, SoFi's loan sales in the latest quarter were made while Chief Financial Officer Chris Lapointe indicated during the earnings call that the company would continue to retain some loans. The company's focus remains on maximizing returns on its originated loans and equity, adapting strategies based on the market environment. In the latest quarter, SoFi engaged in a few small sales to keep channels open but maintained a strong emphasis on holding loans for a longer duration to optimize returns.

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Another highlight for analysts was SoFi's improved outlook. The company now expects adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) for the period to be in the range of $333 million to $343 million, surpassing its previous forecast of $268 million to $288 million.

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Keefe, Bruyette & Woods analyst Michael Perito noted that while the stock is near technical highs, the raised guidance and stronger margins, particularly in the financial services segment, provide a clearer path towards profitability by the end of the year.

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Mizuho's Dan Dolev expressed that the significant increase in the full-year guidance demonstrates the company's strength and positive prospects.

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In the second quarter, SoFi achieved a net loss of $58 million, or 6 cents per share, a notable improvement compared to a loss of $106 million, or 12 cents per share, in the same period of the previous year. Analysts projected a 7-cent loss per share, according to FactSet data.

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SoFi's revenue rose from $363 million to $498 million in the second quarter, surpassing the FactSet consensus of $486 million on a GAAP basis.

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During the second quarter, SoFi successfully added over 584,000 new members and introduced 847,000 new products. Total deposits grew by $2.7 billion, reaching $12.7 billion by the end of the quarter, with 90% of the deposits coming from direct-deposit members.

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SoFi's personal-loan business experienced an impressive 51% year-on-year increase in origination volumes, reaching $3.7 billion, setting a company record. Personal-loan originations were also up 27% sequentially. This strong performance can be attributed to investments in technology to automate and accelerate the application-to-approval process for qualified borrowers, rigorous testing of risk controls, and underwriting models to maintain high credit quality and strong returns.

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However, student-loan origination volumes decreased by 1% year-over-year to $395 million, reflecting the uncertainty around federal student loan payments. Home-loan originations declined by 27% from the previous year to $243 million, although they almost tripled on a sequential basis, benefiting from the technology platform and loan capacity from an acquisition at the beginning of the quarter.

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SoFi's technology-platform business reported 129 enabled-client accounts as of the second quarter, with Galileo, a part of that business, securing five new clients during the same period.

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