SoFi Technologies Inc. (NASDAQ: SOFI), a bank that reported market-beating results for the fourth quarter, is near 15% at premarket Monday.
Investors primarily react to earnings guidance, which fell short of the experts’ expectations.
Management expects earnings per share to be 3 cents during the first quarter, and 26 cents over the course of the year. This is compared with the analysts’ expectations of 5 cents or 28 cents.
SoFi’s stock has risen nearly 150% since its early-August low, despite a slight material decline this morning.
SoFi management is as optimistic as ever
Anthony Noto, SoFi’s chief executive officer, attributed this mismatch in guidance to the fact that tax obligations for the year were not included in the consensus estimates.
In a recent press release, he said that it was reasonable for investors to think about buying fintech stocks after today’s decline. “The best is still to come”, he added.
SoFi’s stock is attractive because it has surpassed Street expectations in the fourth fiscal quarter.
Analysts had predicted 4 cents a piece on $675 million of adjusted net revenues. It actually earned 5 cents.
The shares are not attractive to income investors because they do not pay dividends.
Cramer prefers SoFi over other fintech stocks
The margin expansion could also inspire confidence among investors in SoFi. In its most recent quarter, the company achieved a new record for margins since early 2022.
Since its founding in 2011, SoFi is committed to disrupting traditional financial services.
It initially focused on only the student loans market, but over time, has expanded into other business areas, such as personal loans, home mortgages and investment platforms.
It was for this reason that Jim Cramer, the famous investor on Mad Money last week, chose to recommend SoFi over Nu Holdings or other fintech companies.
The Street-high target price for SOFI is currently $20, which suggests a potential 30% increase from the current level.
Stocks of SoFi are not expensive.
In the release of earnings, SoFi’s chief executive Anthony Noto called 2024 “a transformational year”, in which it achieved everything that the company had set out to do.
This included diversifying our business to make it less capital-intensive, reduce risk and drive meaningful profitability in order to have adequate capital on the balance sheet.
He said that the Nasdaq listed firm will invest at a greater rate in this year, as investment tends to “drive strong direct returns.”
It’s worth noting that the stock of SoFi isn’t particularly expensive, at around 5 times next year’s revenue.
The company could reach a record high share price in 2025 if it continues to steal clients from traditional banks.
The post Why SoFi’s missed guidance isn’t nearly as alarming as it appears may be updated as new information becomes available.
