Tuesday, UBS adjusted its outlook on SoFi Technologies (NASDAQ:SOFI), lowering the price target to $7.50 from the previous $8.00 while keeping a neutral rating on the stock. The financial services firm reported adjusted net revenue of approximately $581 million, surpassing Wall Street's expectations due to strong performance in its Lending and Other revenue sectors. However, the Financial Services and Technology Platform segments did not meet projections.
SoFi's adjusted EBITDA of $144 million exceeded the Street's estimate of $122 million. The company's Technology Platform revenue demonstrated a growth acceleration, with a 21% year-over-year increase, outpacing the 13% growth in the previous quarter. This was attributed to new client acquisitions over the past three quarters, significant banking deals in Latin America, and the successful monetization of existing clients launching new products.
For the full year of 2024, SoFi has raised its adjusted revenue guidance by approximately 1% or $25 million at the midpoint, now forecasting between $2,390 million and $2,430 million. This adjustment comes after a $26 million revenue beat in the first quarter compared to guidance.
SoFi anticipates a combined growth of around 50% from its Tech Platform and Financial Services, with Financial Services now expected to grow more than 75%, an increase from the previously estimated ~75%. Meanwhile, Lending revenues are projected to be approximately 92-95% of the 2023 level.
The company has also increased its full-year 2024 guidance across the board, with EBITDA projections of $590 million to $600 million, which is about 2% above the Street's midpoint estimates, and an expected margin of around 25%.
The GAAP net income forecast includes a gain of approximately $59 million from debt extinguishment in the first quarter, with estimates ranging from $165 million to $175 million. The GAAP EPS is expected to be between $0.08 and $0.09, which aligns with consensus at the lower end.
UBS noted that SoFi is relatively well-positioned among U.S. Neobanks, a market anticipated to undergo consolidation and service re-bundling. The firm also highlighted the positive outlook for SoFi's sustained GAAP profitability, although it expressed a view of balanced risk-reward for the company's stock.
InvestingPro Insights
As SoFi Technologies (NASDAQ:SOFI) navigates the financial landscape, real-time data from InvestingPro provides a deeper look into the company's financial health and market performance. With a market capitalization of $7.44 billion, the company shows a promise of growth with an expected net income increase this year, as per one of the InvestingPro Tips. This aligns with the company's recent uplift in its full-year 2024 revenue guidance and its robust performance in the Lending and Other revenue sectors.
However, investors should note that SoFi's valuation implies a poor free cash flow yield and the company has been quickly burning through cash. Additionally, while analysts predict that SoFi will be profitable this year, it has not been profitable over the last twelve months, which is something to consider when evaluating the company's long-term profitability potential.
The company's stock has experienced a 13.08% price return over the past year, yet the year-to-date return shows a decline of 29.2%. With a P/E ratio of -27.64, the market is pricing in future growth, which is supported by a strong revenue growth of 34.6% in the last twelve months as of Q1 2024. This financial data suggests that SoFi is expanding its revenue streams effectively, but the profitability challenge remains.
For those interested in further analysis, there are additional InvestingPro Tips available that could provide more insights into SoFi's financials and future prospects. Take advantage of a special offer to access these insights with a coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription.
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