Shares of digital personal finance company SoFi Technologies (SOFI -1.36%) were down 12.5% to $15.28 as of 10:30 a.m. EDT today. In its second-quarter earnings report, SoFi said it grew its revenue by a stunning 101% year over year to $231.3 million. At the same time, the company added 42.9 million new accounts to reach a total of 78.9 million. But they were not enough to satisfy investors' appetite.
SoFi stock is incredibly expensive right now at a whopping 15 times revenue. With that many accounts already outstanding, investors are betting that the company's growth trajectory will fall off the cliff in the near future.
Like all traditional lenders, the company provides home loans, personal loans, student loans, and various debit and credit card services. There isn't anything innovative about SoFi per se other than ramping up perks with its lending services (such as unemployment protection) and streamlining its products into an all-in-one platform.
What's more, SoFi is cutting into its profitability for the sake of user growth, an everlasting controversial topic in the investment community. During the quarter, the company's cash flow from operations fell to $82.6 million compared to $394.9 million in the prior year's quarter. To attract more users, the company needs to offer more benefits to its loans, which eats into a huge chunk of its net interest income. I'd be careful about investing in this financial stock at the moment as its business model does not look sustainable.