With a market cap of $4.68 billion, SoFi Technologies, Inc. (SOFI) provides digital financial services. The Company operates through three segments: Loans; Technology platform; and Financial Services. It offers student loans, personal loans and home loans.
In addition, SOFI operates Galileo, a technology platform that offers services to financial and non-financial institutions; Apex, a technology platform that provides investment custody and clearing brokerage services; and Technisys, a cloud-based digital multi-product banking platform.
On August 24, Joe Biden announced a three part plan for providing a student loan relief to deal with the financial damage of the pandemic, fulfilling the president’s campaign promise. The Department of Education will provide up to $20,000 in debt forgiveness to Pell Grant recipients and up to $10,000 in debt forgiveness to non-Pell grantees.
Along with the loan forgiveness plan, Biden is expected to end the student loan repayment pause that has been in effect for more than two years. The recent announcement should be a catalyst for SOFI, as the company could see a significant increase in the number of borrowers seeking to refinance their remaining balances.
However, investors have been bearish about SOFI due to its disappointing financials and declining growth. For the second quarter of fiscal 2022, the company’s net loss and loss per share were $95.84 million and $0.12, respectively. Additionally, as of June 30, 2022, its total liabilities were $7.16 billion, compared to $4.48 billion as of December 31, 2021.
Additionally, SOFI has been beaten in recent market turmoil. The stock has fallen 47.8% in the past six months and 62.7% since the start of the year to close the last trading session at $5.85. It is currently trading 76.3% below its 52-week high of $24.65, which it reached on November 11, 2021.
Here’s what I think could influence SOFI’s performance in the coming months:
For the second quarter of fiscal 2022 ended June 30, 2022, SOFI’s non-interest expense increased 15.5% year-over-year to $458.24 million. Its pre-tax loss was $95.72 million. Also, the company net loss and loss per share was $95.84 million and $0.12, respectively.
As of June 30, 2022, SOFI’s total liabilities amounted to $7.16 billion compared to $4.48 billion as of December 31, 2021. In addition, cash outflows related to operating and investing activities amounted to $1.96 billion and $4.92 million, respectively, for the six months ended June 30.
Gloomy prospects for growth
Analysts expect the company’s revenue to grow 41.7% year-over-year to $391.05 million in the third quarter of fiscal 2022 (ending September 2022) . However, the consensus estimate for loss per share for the current quarter is expected to be $0.07. Additionally, the company has missed consensus EPS estimates in three of the past four quarters, which is disappointing.
Additionally, analysts expect the company’s loss per share for fiscal 2022 and 2023 to be $0.32 and $0.11, respectively.
In terms of net income margin over the last 12 months, SOFI’s negative result of 28.46% compares to the industry average of 27.96%. And its trailing 12-month ROCE and ROTA of minus 8.25% and 2.74% compare to industry averages of 11.53% and 1.21%, respectively. Similarly, the stock’s trailing 12-month asset turnover rate of 0.12% is 38.8% below the industry average of 0.20%.
POWR ratings reflect bleak outlook
SOFI’s overall F rating translates to strong selling in our own POWR Rankings system. POWR ratings are calculated by considering 118 separate factors, with each factor weighted to an optimal degree.
SOFI has an F rating for Stability. The stock’s beta of 1.12 justifies the Stability rating. Additionally, it has an F rating for quality, consistent with its below-industry earnings multiples.
SOFI ranked #107 out of 108 stocks in the F rating Financial Services (Corporate) industry.
Beyond what I said above, we also assigned SOFI ratings for Sentiment, Growth, Value and Momentum. Get all the SOFI ratings here.
Fintech disruptor SOFI posted poor financial results in the second quarter of fiscal 2022. And analysts expect the company to post significant losses in fiscal 2022 and 2023. Additionally, the stock is rising. is currently trading below its 50- and 200-day moving averages of 6.50 and 9.76, respectively, indicating a downtrend.
Although Biden’s recent announcement on student debt would act as a catalyst for SOFI, the company is still expected to experience a near-term growth deceleration. Given SOFI’s disappointing financials, weak growth prospects, below-industry profitability and high volatility, we think it would be wise to steer clear of the stock now.
How SoFi Technologies, Inc. (SOFI) Works Up to his peers?
SOFI has an overall POWR rating of F. Also check out these other medical device and equipment stocks: Forrester Research, Inc. (FORR) and Everi Holdings Inc. (ERI) with an A (Strong Buy) rating and WNS (Holdings) Ltd. ADR (SMB) with a B (purchase) rating.
SOFI shares fell $5.85 (-100.00%) in premarket trading on Friday. Year-to-date, SOFI is down -63.00%, compared to a -15.92% rise in the benchmark S&P 500 over the same period.
About the Author: Mangeet Kaur Bouns
Mangeet’s keen interest in the stock market led her to become an investment researcher and financial journalist. Using its fundamental approach to stock analysis, Mangeet seeks to help retail investors understand the underlying factors before making investment decisions. After…