Shares of famous fintech company and online bank SoFi Technologies (SOFI +1.79%) leaped nearly 15% in early trading on the Nasdaq Monday after the company reported what CNBC termed a "massive revenue beat" (but no profits). Of course, Wall Street hadn't expected it to earn any profit in any case.
Heading into Q3 2023, analysts forecast SoFi would lose $0.07 per share on $512.1 million in revenue. As it turned out, losses were $0.03 per share, while SoFi exceeded revenue expectations by about 3.6% -- $530.7 million.
If that sounds a bit less than "massive" to you, well...it seems many investors agree. As of 10 a.m. ET, SoFi's stock gains have shrunk to just 3%.
NASDAQ: SOFI
Key Data Points
Why SoFi stock popped, then dropped
It's also worth pointing out that SoFi's "earnings beat" wasn't all it's cracked up to be. On the one hand, "adjusted earnings" -- a non-GAAP metric -- were less bad than forecast, and SoFi's better-than-expected revenues set a new quarterly record for the company. On the other hand, when calculated according to generally accepted accounting principles (GAAP), SoFi's losses for the quarter tripled year over year.
SoFi lost $0.29 per share, GAAP, for the quarter.
Still, some of the numbers for the quarter were good. SoFi added 717,000 new "members" (i.e., customers) in Q3, and now boasts "over 6.9 million" members in its network -- 47% more than it had a year ago. It also grew its deposit base (SoFi won its banking license last year) by 23%, growing that number to $15.7 billion.
Should you buy SoFi stock?
On the other hand, though, revenue at SoFi grew only 27% in the quarter -- which is slower than member growth, and an indication that many members may be just dipping their toes into the water to try out the service. And, of course, despite members growing, losses grew much, much faster.
The good news for investors is that SoFi thinks its days as a money-losing internet bank may be coming to an end. For the full year, granted, SoFi will probably still lose money. But it's raising its revenue guidance to about $2.05 billion. And management has just forecast that next quarter -- Q4 2023 -- it will earn positive GAAP profits for the first time since early 2020 (according to historical data from S&P Global Market Intelligence), helped by member, deposit, and revenue growth, and an expanding net interest margin (now at 6%).
Can SoFi achieve this feat? Wall Street thinks it can, and indeed forecasts that after turning profitable next quarter, SoFi will earn its first-ever full-year profit in 2024 -- then quintuple that profit in 2025.
Admittedly, unprofitable SoFi stock may not look like a great deal today, or even at next year's forward P/E ratio of 32. But if SoFi can deliver on its promise of profits next quarter, and grow as fast as Wall Street says it was thereafter, this stock could still be a winner.
