SOFI Q4 Earnings Preview- Can the company turn things around?
2min read 
SoFi Technologies (SOFI), is a digital personal finance company that offers various financial products and services, including loans, investment services, and insurance. The company reports its Q4 earnings Monday before the market opens. Shares of SOFI have tumbled 24% to start the year as investors are worried about credit issues with rising rates. Q4 is an opportunity for the company to show how it is managing the challenging environment.
SoFi's performance is a key indicator of consumer credit trends and behaviors as it represents a comprehensive cross-section of financial services, from loans to investment products, thereby offering insights into consumer borrowing, saving, and spending patterns. Additionally, as a fintech company with a broad customer base, SoFi's data can reflect broader economic trends, including how consumers are managing debt and capitalizing on financial opportunities in a dynamic market.
One of the key areas investors and analysts focus on when reviewing SoFi's Earnings report is the company's earnings per share (EPS) and revenue. The consensus EPS estimate is $0.04, which would be a significant increase of 180% year-over-year if achieved. Analysts project that SoFi's revenue for Q4 will be around $571.71 million, marking an increase of 28.9% compared to the same period last year.
There is a consensus expectation that Q4 will be SoFi's first-ever quarter to break even on a GAAP basis, with an EPS expected to land just above $0.00, moving up from negative territory for the first time.
Growth in the member count and product adoption will be scrutinized, especially following the addition of 717,000 new members in Q3, which represented a 47% increase year-over-year.
With sales and marketing expenses amounting to $544.7 million in the first nine months of the year, it will be important to see how these costs are managed and how they relate to revenue growth.
Any forward-looking statements or guidance for the next fiscal year will be critical, with Wall Street forecasting an EPS of $0.06 for next year.
Additionally, SoFi's expansion into various financial products, such as loans, investment services, and insurance, is an essential aspect to consider. The adoption rate of these products by new and existing customers can provide valuable insights into the success of SoFi's diversification strategy. In recent news, Blockchain.com announced a definitive deal with SoFi, in which all SoFi crypto accounts for US users will have the opportunity to migrate to Blockchain.com's platform. This highlights SoFi's effort to strengthen its position in the cryptocurrency market and potentially expand its user base.
As SoFi operates as an online bank, the net interest margin, which represents the difference between interest income generated and interest paid out to lenders , plays a crucial role in determining the company's profitability. Investors will be analyzing this: We have seen different opinions from analysts regarding SoFi's investment value. J.P. Morgan has placed SoFi on Negative Catalyst Watch due to perceived risks to 2024 estimates and guidance. JPM believes there has been a strategic shift away from balance sheet/loan growth, which has been the key profit driver for SoFi over the past two years.
Truist recently reiterated its Buy rating for SoFi, highlighting the durability of its profit model and projecting a long-term contribution from non-lending activities.
The technical analysis of SOFI's chart reveals a bearish outlook, as evidenced by the stock trading below the key long-term indicator of the 200-day Simple Moving Average (SMA). This move, accompanied by a 'death cross' where the 50-day SMA also falls below the 200-day SMA, underscores the stock's negative momentum. Although the Relative Strength Index (RSI) is not signaling an extreme oversold condition, the significant volume during the price drops and the stock's decline from previous levels in 2024 suggest strong selling pressure. Overall, these technical factors combined indicate a potentially challenging period ahead for SOFI, with investors possibly viewing the move below the 200-day SMA as a confirmation of a sustained downtrend.
Analyzing SoFi's growth potential and investment value requires a careful evaluation of various factors. Investors and analysts should closely monitor SoFi's upcoming earnings report, including EPS, revenue, user growth, product adoption, net interest margin, loan performance, and provisions for loan losses. Analyst opinions and recent partnerships, such as the one with Blockchain.com, also provide valuable insights. By considering all of these factors, investors can make well-informed financial decisions in a dynamic and competitive fintech landscape.