SoFi Rises on Strong Third Quarter Print And Upgraded Full Year Guidance

Shares of fintech SoFi Technologies (US:SOFI) rose 5.3% on Tuesday after opening more than 18% higher at $6.46 per share on the back of strong third quarter earnings.

Despite the breath of fresh air for SOFI investors following the rally, SOFI’s stock remains down more than -60% over 2022 as valuation concerns have impacted SOFI and other growth companies.

For the third quarter, SoFi grew net revenue by 56% to $424 million and adjusted net revenue by 51% to $419 million. The adjusted sales figure came in around 6.5% ahead of analyst forecasts predicting a figure of around $390 million.

The group’s adjusted EBITDA grew substantially by 332% over the year to $44.3 million from $10.3 million in the prior comparative period. Analysts were expecting a figure marginally below $30 million, resulting in a solid beat.

At the bottom line, however, the group’s net loss widened 56% to -$74 million from -$30 million in the prior year but improved from the -$95 million net loss generated in the second quarter.

The net income resulted in earnings per share of -9 cents which fared better than analyst forecasts of around -11 cents.

With only one quarter left for the year, management was able to provide narrowed guidance with higher visibility of earnings in the remaining months. Sales guidance expectations for the full year were upgraded to $1.517-1.522 billion from $1.508-1.513 billion prior.

Additionally, SoFi management upgraded adjusted EBITDA guidance to $115-120 million from $104-109 million prior, representing a 3.3% update at the midpoint of each range.

Anthony Noto, CEO of SOFI commented on the result highlighting, “Our bank charter is enabling new flexibility that has proven even more valuable in light of the current macro environment, and the economic benefits are already starting to materialize and positively impact our operating and financial results”

The growth in deposits for the group and the lower cost of funding for loans has resulted in net interest margin and profit growth for the group. This is a general theme the banking sector is experiencing as favourable deposit pricing spreads give management flexibility to grow margins.

The net interest margin benefits are likely to unwind over the medium term as strong loan competition impacts margins and deposit spreads unwind when customers refinance.

Analyst John Hecht from Jefferies Investment Bank was pleased with management’s ability to acquire high-quality customers in a challenging macro environment. Hecht held his ‘buy’ call firm and $8 price target.

Elsewhere at Oppenheimer, analysts believe SOFI will eventually attract long-term investors on management’s strong execution abilities. The firm believes student loan origination tailwinds will continue to offset some of the macroeconomic headwinds currently being experienced. The firm has a $7 price target and an ‘outperform’ rating on the stock.

On average, SOFI has a consensus ‘overweight’ recommendation and an average $8.15 price target.

Fintel’s platform analysis of the underlying options market for SOFI suggests that investors have become more bullish over the last 3 months.

This has been explained by the put/call ratio falling to 0.54 from a value towards 1 over July and August.

The put/call ratio is determined by analysing all put and call interest in the market for a stock over time with values towards 0 indicating stronger bullish sentiment as it means call open interest carries greater weight than put interest.

SoFi has risen 10 ranks in popularity this week and is currently the 29th most held security by retail investors that have linked their portfolio for free with the Fintel platform.

This article originally appeared on Fintel

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