The Stock of Sofi Sinks as It Fails to Meet Profitability Expectations

Shares of SoFi Technologies Inc. experienced a sharp decline in early Monday trading as investors reacted more strongly to the company’s cautious profitability forecast than to its robust revenue outlook and solid fourth-quarter results.

‍

For the first quarter, SoFi projected adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) between $175 million and $185 million, a key measure of profitability. This fell short of analysts' expectations, with FactSet’s consensus estimate standing at $192 million.

‍

Following the announcement, SoFi’s stock tumbled 12.2% in premarket trading, marking a sharp reversal from its recent rally. Just two sessions earlier, the stock had closed at its highest level since November 2021.

‍

Despite concerns over profitability, SoFi provided an optimistic revenue outlook for the current quarter. The company is aiming for adjusted net revenue of $725 million to $745 million, which excludes certain nonrecurring items. This surpassed analysts’ forecasts, with FactSet’s consensus at $688 million.

‍

SoFi also reported record-breaking results for the fourth quarter, which ended on December 31. The company achieved adjusted net revenue of $739.1 million, representing a 24.4% year-over-year increase and exceeding the FactSet consensus estimate of $674.6 million. This revenue beat was SoFi’s largest since the first quarter of 2022.

‍

Total net revenue for the period rose 19.3% to $734.1 million. This growth was fueled by a significant 63% increase in fee-based revenue, which reached $289.5 million. Additionally, financial services revenue surged 84% to $256.5 million.

‍

Membership growth also hit record levels, with SoFi adding 785,000 new members during the quarter, a 34% increase compared to the same period last year.

‍

SoFi saw notable gains in its lending business as well. Home-loan originations, which include purchases, refinancing, and home-equity loans, rose 87% to $577 million, marking the strongest performance since late 2021.

‍

Student-loan originations climbed 71% to $1.3 billion, the highest level in four years. Meanwhile, personal-loan originations reached a record $5.3 billion, a 63% year-over-year increase.

‍

On the profitability side, SoFi reported net income of $332.5 million, or 29 cents per share, compared with $47.9 million, or 2 cents per share, in the year-ago period. Adjusted earnings per share (EPS) rose to 5 cents, slightly surpassing the FactSet consensus of 4 cents.

‍

Although SoFi demonstrated strong momentum in revenue growth and member acquisition, its lower-than-expected profitability forecast weighed heavily on investor sentiment. As a result, the market’s reaction overshadowed the company’s impressive fourth-quarter performance and positive revenue guidance.

‍