Banking disruptor SoFi (SOFI 4.48%) has fallen by about 20% from its recent highs and is set to report its fourth-quarter earnings on Friday, Jan. 30, before the market opens.
To be sure, SoFi's recent results have been excellent. The company reported all-time highs for revenue, adjusted EBITDA, fee-based revenue, new member additions, and product growth in the third quarter, and management raised its full-year guidance as a result. When SoFi reports fourth-quarter earnings, it expects to report a total of 3.5 million new members for the full year, 36% year-over-year revenue growth, and full-year adjusted EPS of $0.37 per share.
Image source: SoFi.
Additionally, SoFi's loan growth has been accompanied by lower default rates, which is an excellent combination to see. There has also been stellar growth in fee-based revenue, especially from its loan platform business, which originates loans on behalf of third-party partners and provides loan referrals, generating low-risk, high-margin fee income.
If SoFi meets or exceeds its guidance (which it has a strong track record of doing), the fourth-quarter results should be rather impressive. But there's more to the story.
2 big questions I want answers to
I won't just be paying attention to SoFi's earnings report on Jan. 30. I'll also be tuning in to the earnings conference call to (hopefully) get some clarification on the company's recent moves.
NASDAQ: SOFI
Key Data Points
First, I'd like some clarification regarding the company's recent capital raise. In early December, SoFi sold about $1.5 billion of new shares to raise capital for "general corporate purchases," and I found the move to be a bit odd. After all, SoFi's capital levels looked perfectly fine prior to this move, and there's no clear reason why management felt the need to dilute shareholders. Don't get me wrong -- it's entirely possible CEO Anthony Noto and his team have a great reason for doing it, I'd just love more clarification on what it is.
Second, SoFi recently introduced new products, including the SoFi Smart Card, and transitioned to a $10 monthly fee for SoFi Plus benefits (previously, it was free if you made eligible direct deposits). Note that the Smart Card requires a SoFi Plus membership. I'd love to hear more about the initial reaction and customer enthusiasm for this change.
The bottom line is that SoFi could certainly be an attractive stock at 20% off the highs. But I'd feel more comfortable adding to my already large SoFi position once we get clarification on a few lingering questions.
