Shares of Sofi Technologies (SOFI -5.71%) plunged 35.2% in April, according to data from S&P Global Market Intelligence.
Earlier this month, management updated its revenue and adjusted EBITDA (earnings before interest, tax, depreciation and amortization) guidance for 2022 down, as a direct result of the Biden administration’s postponement of the end of of the student loan moratorium put in place during the pandemic.
Unfortunately, this happened in a brutal month for equities, with the S&P500 plunging 8.8%. In this environment, even stocks with good numbers are down. So if you’re a missing or declining company, your stock has likely experienced a steep SoFi-like drop. But is the fall an opportunity?
On April 6, SoFi issued a press release, lowering its full-year revenue and adjusted EBITDA guidance from $1.57 billion and $180 million, to $1.47 billion. and $100 million, respectively. Interestingly, although the Biden administration only delayed the student loan moratorium until August 1, SoFi management assumes the moratorium is not lifted for the entire year. That’s because the student loan decision is a politically thorny one, which management says will be pushed back until after November’s midterm elections.
However, CEO Anthony Noto struck an optimistic tone, saying:
Even assuming there will be no end to the moratorium in 2022, our new full-year 2022 financial forecast represents approximately 45% year-over-year revenue growth. adjusted net revenue to $1.47 billion, a tripling of adjusted EBITDA to $100 million and a doubling of margins. SoFi has done an outstanding job of achieving record financial results, member and revenue growth, and consistent profitability, despite the negative impact of the extended moratorium on student loan payments. We will work diligently to continue this trend in 2022.
After the stock’s massive decline, SoFi is trading at a market cap of $5.2 billion, about 3.5 times this year’s new sales estimates. Although Adjusted EBITDA is positive, the company is still losing money on a GAAP basis, so it’s really not what investors want to buy right now.
That being said, SoFi is growing very quickly; as Noto said, even his reduced forecast would represent revenue growth of around 45% and EBITDA growth of around 200%. Importantly, membership grew 87% year-over-year last quarter, showing that its offerings are definitely resonating in the marketplace.
Additionally, while SoFi is known for refinancing student loans as its premier core product, the company has added many new products and features in recent years, such as personal loans, home loans, investment brokerage , credit card, bank account, and others.
Therefore, growth investors may want to investigate SoFi at this discounted long-term price. Just know that the company’s credit underwriting wasn’t really tested by a bad recession. This is part of the reason SoFi and really all fintech stocks are down, but assuming the economy avoids the worst-case scenario, the stock looks tempting at these levels.
The company releases its first quarter results on Tuesday, May 10.