At the beginning of the month, management updated its 2022 forecast for revenue and adjusted EBITDA (earnings before interest, taxes, depreciation, and amortization) downwards, as a direct result of the Biden administration postponing the end of the student loan moratorium implemented during the pandemic.
Unfortunately, that occurred during a brutal month for stocks, with the S&P 500 plunging 8.8%. In this environment, even stocks reporting good numbers are going down. So if you're a company missing or guiding down, your stock likely saw a brutal plunge akin to SoFi's. But is the fall an opportunity?
On April 6, SoFi issued a press release, lowering its full-year revenue and adjusted EBITDA projections from $1.57 billion and $180 million, to $1.47 billion and $100 million, respectively. Interestingly, although the Biden administration has only delayed the student loan moratorium until Aug. 1, SoFi's management is assuming the moratorium isn't lifted for the entire year. That's because the student loan decision is a politically thorny one, which management anticipates will be pushed until after the November midterm elections.
CEO Anthony Noto struck an upbeat tone, however, saying:
Even with the assumption of no end to the moratorium in 2022, our new full year 2022 financial guidance represents approximately 45% year-over-year Adjusted Net Revenue growth to $1.47 billion, a tripling of Adjusted EBITDA to $100 million, and a doubling of margins. SoFi has done an outstanding job achieving record financial results, member and product growth and consistent profitability, despite the negative impact of the extended student loan payment moratorium. We will work diligently to continue that trend in 2022.
After the massive decline in the stock, SoFi trades at a $5.2 billion market cap, or around 3.5 times this year's new sales estimates. While adjusted EBITDA is positive, the company is still losing money on a GAAP basis, and so it's really not what investors want to buy right now.
That being said, SoFi is growing really fast; as Noto said, even its reduced guidance would amount to about 45% revenue growth, and about 200% EBITDA growth. Importantly, it grew membership by 87% year over year last quarter, showing that its offerings are definitely resonating in the marketplace.
Also, while SoFi is known for student loan refinancing as its first core product, the company has added lots of new products and features in recent years, such as personal loans, home loans, an investing brokerage, a credit card, a bank account, and others.
Therefore, growth investors may want to investigate SoFi at this reduced price for the long term. Just be aware, the company's credit underwriting hasn't really been tested by a bad recession. That's part of the reason SoFi and really all fintech stocks are down so much, but assuming the economy dodges the worst-case scenario, the stock looks tempting at these levels.
The company releases first-quarter earnings on Tuesday, May 10.