SoFi stocks rise as earnings yield “big positives” for earnings and growth

The shares of SoFi Technologies Inc. rose in premarket action Monday after the digital financial services company beat expectations with its latest earnings call and said it expects to be profitable on a GAAP basis in the fourth quarter of this year.

The company saw its fourth-quarter losses narrow to $40 million, or 5 cents per share, from $111 million, or 15 cents per share, in the prior quarter. Analysts had expected a loss of 9 cents per share for the period.

On custom basis, SoFi SOFI,
reported adjusted earnings before interest, taxes, depreciation and amortization (Ebitda) of $70 million, more than the approximately $5 million in adjusted Ebitda it generated in the same quarter last year. The FactSet consensus was for $43 million.

Shares were up 6% in premarket trading.

See also: SoFi stock gains after the company gives an optimistic 2023 earnings forecast

The company saw fourth-quarter noninterest income jump from $144.6 million to $144.6 million from $136.5 million as it benefited from higher personal loans, but also recorded lower student loans and home loans.

Personal loans were up 50% from a year earlier, while student loans were down 72% and home loan loans were down 84% “due to macroeconomic headwinds and an ongoing transition of partners for executing home loans,” according to SoFi’s release.

SoFi hit $2.5 billion in personal loans in the quarter. “This strong performance was supported by years of technology investments to automate and accelerate the application-to-approval process for qualified borrowers and frequent testing of risk controls and underwriting models to maintain our high standard of credit quality,” the company said in its release. .

The company saw a 46% increase in total deposits for SoFi Bank during the period, and SoFi noted that the banking portion of the company generated approximately $30 million in net income on a GAAP basis in what was the third full quarter of its activities were.

The results “appear strong, especially given the interest rate and policy headwinds that continue to run SOFI,” Jefferies analyst John Hecht wrote in a report.

Looking ahead, Chief Executive Anthony Noto said in a release that the company’s growth and improvement in total GAAP net income margin “positions us very well in 2023” for “achieving GAAP net profitability in the fourth quarter.”

“The strong increase in sales and adjusted Ebitda are key positives of the fourth quarter results,” Mizuho analyst Dan Dolev wrote in a note to clients. “Additionally, the promise to deliver positive GAAP net income in 4Q 2023 should be well received as GAAP losses in 2022 have been a major deterrent for FinTech investors.”

The company’s fiscal outlook for the first quarter calls for $40 million to $45 million in adjusted EBITDA, while analysts expected $50 million. Management also expects $260 million to $280 million in full-year adjusted EBITDA, while the FactSet consensus came in at $246 million.

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