Wall Street Is Looking at SoFi Stock the Wrong Way

SoFi just reported earnings this morning with a triple beat, meaning they beat on revenue, they beat on net income, and they raised their guidance. And yet, the stock dropped by almost 10%. The number one Wall Street analyst, ended up coming out, Devin Ryan, with a $30 price target, saying that this quarter was above and beyond expectations. Andrew Jeff, another five-star analyst, came out with a quote here. We think investors should aggressively accumulate SoFi shares as the stock trades down about 10% this morning. These analysts are extremely bullish. So, I wanted to go in, dive into the numbers, and see what the heck is going right, and what is going wrong, and see if this is worth betting even more money on. So, in this video, I dive into all the good, the bad, and the ugly to see what the heck the market is actually seeing, and if we should double down on this investment. Let's jump in. Starting with members. So, if you guys didn't see, we added 1.1 million new members. Exact on my prediction for where I thought that SoFi would add for 34.6%. How did I guess? Well, every single quarter we grow by 34 plus percent. Okay, it's been a consistent for eight quarters in a row now that they've just been able to compound at a certain percentage, which is roughly about 7.5% quarter over- quarter every single quarter for just years. They ended up showing off that unaded brand awareness. Q1 unaded brand awareness was 10%, 10 flat. So, we grew by roughly 40 basis points or so on the unaded brand awareness. That was really good. New members coming onto the platform as well obviously helps. They've been doing a lot of sales and marketing as well. Total products as well as members grow by 34%. Any growth that happens underneath 34% we don't want to see. But anything above, which is what we've really just seen, nearly 41 something%. Is a really really good sign for more products per member than what we had before. meaning average revenue per user goes up and the total customer acquisition or lifetime value to CAC LTV ends up getting extremely in SoFi's favor. That was the initial flywheel of what SoFi wanted to do. And now we're really starting to see that take off. We've spent year and a half in this sort of gully of having much lower products per member than what we initially expected. Now we're blowing past expectations which was around 1.5 products per member. Now we're starting to climb way past that. So really good sign there. Another sign here, this is the financial services productivity loop that someone comes on board for SoFi and they get a SoFi money account. They get SoFi invest and they start to make their way through these products and maybe they only need a SoFi money account for now and then they end up getting a credit card and then they end up getting a loan and they get a new career. So then they go back to SoFi Invest and then back over to a personal loan to fix up their kitchen or something. This sort of flywheel that happens keeps people within the platform and constantly cross buying across all of their different products while they add on new products. So this time you can see SoFi crypto there, SoFi Plus, SoFi Coach, all of these new products that will essentially either help bring someone to another product of SoFi or that product alone will end up making new revenue like SoFi Invest does being like 10 bucks a month per person. Total revenue for SoFi ended up climbing roughly 42%. This is the company that is down 7%. They beat on expectations versus what Wall Street had assumed. They also show off a rule of 40. This is directly from their own earnings presentation. Not only did they put up 40% growth rates, they did it on 30% adjusted EVA margins. 70 rule of 40, almost twice as high, holding up that great growth almost for four, five quarters in a row. So really, really great there. On top of that, feebased revenue mix. This was one of the signs that people pointed to as being a little bit negative for SoFi because it did decrease from 2025 even though it's up from Q1. Q1 was roughly 36%. We're now at feebased revenue being 39%. For anyone new to SoFi, essentially what this means is that money that comes in through a personal loan or money that comes through a home loan, well, it's extremely profitable, it's only profitable while the customer is paying. Customer stops paying, that product becomes instantly extremely unprofitable. And that's how banks go bankrupt. And banks don't hold very high PE ratios or premiums because they have a tendency to bankrupt. It happens, right? Bear Sterns, Lehman Brothers, you can go through the list and find a few as early as like Silicon Valley Bank, and I'm sure there's been some that are even more frequent than that. That being said, that does not talk about the fact that feebased revenue, which is like just collecting fees for service, whether that's a debit card that's tapping on a machine or making a transaction like an options trade on SoFi Invest, that if someone doesn't do well in that trade or they buy the wrong object, that doesn't change SoFi's financial situation. So, feebased revenue is where we want to go. Even though that this percentage dropped year-over-year, the feebased revenue still continues to climb drastically, 25% year-over-year, and we're expecting that if that continues on that annualized base, we're going to crush the numbers of what we've seen before. On top of that, lending revenue we ended up seeing climb to over 50% year-over-year growth rates, $725 million of overall revenue on the lending side. This came in way, way higher than expectations. Okay, I had it being back like what we've seen in previous quarters, like roughly in the 400 millions. On top of that, we're going to expect pretty high growth, but it leans more to the sort of more riskbased revenue, less feebased revenue. So, it's a little bit more risky to do this, but you're only doing this if you feel very confident about the customers that you end up having. Remember, SoFi brings on a customer that has an average income of 150,000. That's brand new, by the way. That's updated. So even as they've been able to scale, they've been bringing on these high-v value customers and those customers also have over roughly 740 FICO scores. So these are affluent high FICO individuals. Now this is the actual originations that we've seen SoFi build off of. We did roughly 14.8 billion total originations across personal loans, student loans, and home loans. On the personal loan side, 3.1 billion of that came from the loan platform business. That means 7 6 billion was originated on behalf of their own balance sheet. That's higher than most of the quarters that we've seen, let alone inclusive going back to March of 2025. We did more for SoFi's own balance sheet this quarter than we did for every segment for March of 2025, let alone the loan platform business, which is there to try to bring in more feebased revenue and lower those risks. What this essentially shows us is that by next quarter, if they keep up this pace, we're going to do more originations than all of 2025 in three quarters. We're practically there on student loans, and we're definitely going to pass that in home loans as well. So, really crazy amount of originations whenever you put them side by side versus the years that we've seen prior. On top of that, they also highlighted this page right here, which we noticed pretty quickly ended up signifying that they have a new type of loan that they have on the loan platform business, autos and SMB loans. Now, it's not talking about auto loans. They're really talking about SMB loans. They sold a massive amount of loans in the loan platform business. I don't want to give it away just yet. It was billions of dollars that they sold in a product line that they just got into a few weeks ago. The amount of potential earnings that SoFi can turn on like a flick of a switch happens instantly. And that's why SoFi is such a catalyst driven stock and why their earnings can continue to surprise to the upside and it's very hard to model sometimes is because who knows if a product like the loan platform business will end up coming up online doing billions and billions of dollars a quarter and that billions of dollars that we saw wasn't even there 3 months ago. the same breath. The reason why we can end up still doing these loan platform businesses and people are still signing up with SoFi is the fact that the net charge offs of the personal loans that we have and the reason why you can take out $10 billion or $14 billion a quarter is because people are paying back their loans. SoFi is getting better and better and better at identifying a customer. Aside from just Q3 of 2025, if you look all the way back to Q1 of 2023, this is the best time to give out a loan in that 3 plus year period. That's crazy to me. And then a lot of people like Muddywaters ended up saying, well, SoFi sells a lot of their loans off. And so the 90 million of highly delinquent loans that they had, because no bank is perfect, you're always going to have a certain amount of people that you end up giving loans to that don't give your money back. SoFi is not immune to that and neither is JP Morgan or any bank. But they show off if we didn't sell those loans, we still dropped from 4.4% to 3.7% even if you were to assume that 90 million is fully delinquent, which it's not. That's why SoFi was even able to sell those loans in the first place is because there's a buyer of $90 million of highly delinquent loans that are going to call and call and call essentially collectors and they're going to try to make some of that money back from those 90 million. They obviously didn't pay 90 million. They probably called SoFi and said, "Hey, we'll give you $8 million for your $90 million of highly delinquent loans." If they can make more than 8 million back, that's a successful business for the collectors. And SoFi, it's already a write off anyway. They've taken it down off their winnings, but at least they can get 8 million back. So, good practice there. This is their personal loan and student loan borrowings. 150,000 to $157,000 in weighted average income. and FICO scores between 742 and 760. On top of this, they ended up comparing their lending from last quarter to this quarter. And they're showing that as these loans, these vintages, which is essentially just saying like a a combined total of loans during a certain time frame. So for them, they're talking about from 2022 all the way to sort of Q1 of 2026. You're taking a look at this vintage of loans that is actually way outperforming what they've did back in 2017. It essentially is showing us that they're getting better at identifying people that are willing to pay them back. Not only that, they're willing to find people that actually want their loans and pay them back. And as time goes on, the spread between their 2017 vintage, which is perfectly acceptable because it beat that 8% life alone loss, which is essentially a common metric for saying, "Hey, if we can go ahead and give out our loans, get back a payment, and we don't lose 8%. That's a good deal." Okay? 8% on average is how many people you're going to eventually say they're not going to pay you back over the life of the loan. What we're end up tracking for is roughly 1.75% which is a 15 basis point increase from last quarter on the seasonality of these loans. Meaning the longer we go on with this vintage the better it looks which is the high majority of SoFi's overall loan book. Then we move on to financial services. Financial services grew by 28%. I was a little bit disappointed in this number. They put a lot of their effort towards lending this quarter and you saw a lot of growth there. But this still was a record quarter for financial services. Brand new high and we ended up showing up with still continued growth. Now, one of the things that gives me a ton of certainty for financial services going forward is their deposits. Take a look at this growth. Now, you'll see that the growth rate ended up shrinking over time, but really that's because SoFi's deposit base was so so low that just bringing on a couple new customers would grow that deposit base extremely quickly. Now that it's getting bigger and bigger and bigger, 27 billion, 37 billion, 45 billion, it's harder and harder to grow. Yet, they've brought up that growth rate from 26% to 44% and now even more recently 54%. So, let's go back and actually think about what the numbers are that we've seen. SoFi brings in a member to its platform, raising up from year-over-year by 34%. They're growing their user base by 34% year-over-year. On top of that, they're going to other customers within their platform and saying, "Hey, you already have a SoFi money account. Why don't you get a SoFi invest account? Why don't you get a personal loan? Why don't you get all these?" And so the crossell ends up increasing to the highest level that SoFi has seen. And we end up seeing product growth grow by roughly 42%. So there's more products this quarter than last. But on top of that, there's one specific product, SoFi Money, which is where the deposits come in, and that ended up growing by 54%. On top of that, we ended up seeing the deposits per member, like what I'm highlighting, be by far the highest we've ever seen, 5,400 per person, and the amount of spend that we're getting on a user now hits $7 billion a quarter, or roughly $887 per person. What you're seeing is is this flywheel. I'm talking about spotting a compounding business. Now, I'm not talking about the reaction to the stock. I'm talking about spotting a compounding company. New members, the members like it so much that they're willing to take out a second one. And then the products that you have out of those second ones are being utilized more than ever on a per person basis, on an average revenue per user basis, and the customer acquisition costs are falling. That is the definition of an active flywheel. Big step up in overall interchange, more spend on the company. And like they said, during the quarter, we received record interchange fees, up 67% year-over-year and 25% up from just the last quarter. They also said, "We think that we've cracked the code on efficiently acquiring highquality credit card members. Year-over-year, credit card revenue has more than doubled. In fact, credit card revenue is up nearly 50% and products are up 17% just from the last quarter. We're excited by this trend that we're seeing not only in the backbook, but we've also reached profitability. There's been two products that I've been highlighting for years, saying that these products are not profitable yet. That's SoFi Invest and SoFi credit card. And the one that I was worried about the most was credit cards because obviously there's default concerns and these sort of things. That's no longer the case. Credit cards before were a drag on margin. Now they're actually accretive to overall margin. This is a big change in their overall business and a very very good sign from a product that I was really worried about. On top of that, SoFi's tech platform, this is really where we're starting to see the things that people don't like. But it's not like we didn't see this last quarter. The major sell-off didn't happen this quarter. It happened last time because we ended up losing the biggest client that was on our platform, which was Chime. They ended up building their own software stack and they use Chimeore instead of Galileo, which is now called SoFi Technology Solutions. The overall amount of members is trying to build back up to new highs, but we're still going to have a little bit of time before SoFi's technology platform or Galileo, whatever you want to call it, is going to get back to anywhere where it was before. So, I'm including this 0%. Anything that's extra from Galileo, great, but I'm not including this in any of my estimates. It's just merely a product that essentially helps them build out products faster, like SMB, for example. Then there's a bunch of metrics like stockbased compensation or sharebased compensation that also I think need to be highlighted because back whenever we were covering this company years ago one of the aspects that was really concerning to people was stockbased compensation was extremely high 18% 15% way too high as a percentage of revenue. Now even though stockbased compensation has climbed recently that total amount is roughly 6.3%. definitely in the realm of a reasonable SBC for a very fast growing company. After you take off all the expenses, after you go through all the margins, net income came in at about $156 million. Margin was a little bit pressed this quarter. And they said if it wasn't for their tax situation, they would roughly be guiding for 5 cents higher for full year. So instead of 60 cents, they'd be guiding for 65. Assuming that SoFi's Q2 would see roughly 1/3 of that, it might have been 13 cents of EPS versus 12 cents or maybe even 14 cents or something. Who knows? One of the things that they really wanted to highlight and I think is really important is how they're actually going to drive to 20 to 30% of ROCE. They said that they want to get to a range, which is quite exciting, adjusted net income margins of 25%. We've heard them talk about 20% before that they wanted to guide for 30% adjusted IBIDA 20% net income margins. Now they're talking about 25% net income margins and that the revenue to equity ratio will be at one times. This is another really important point. So essentially the math that they're doing is hey our ROCE will be 25%. if they do want to track revenue with their overall amount of equity, then tangible book is going to be an extremely important stat to track because that's growing like crazy. If their tangible book is essentially, hey, how much can you lend out? How fast can you grow? What are all these aspects that after you count out all your liabilities, how fast can SoFi go? And yes, a large amount of these two quarters that have led us to higher and higher levels is because of capital raises. They ended up selling off shares to end up raising this capital to bring up their tangible book, which is very true. But it's not like it's staying flat. It's continuing to grow. Now, hitting a new high, $9 billion. They said, "Based on our current operating plans and the guidance that we've provided, we feel really good about being able to operate within the confines without needing to raise capital." So, they're not looking to raise more capital. The company is continuing to operate extremely efficiently. So, I don't think that this selloff should happen. Come on, look at this. revenue up 8.3% versus expectations. EPS beat by 9% great quarter this morning. If I look at SoFi as a whole really I see a company that is a flywheel growing beating expectations raising guidance all while launching some of the biggest potential new products that we've seen in the future. This is not launching L1 options or dark mode or some of the old jokes that we've talked about in the past with SoFi. They're launching big business banking, small business loans, SoFi USD, SoFi pay, SoFi crypto. These are major businesses, essentially business lines in themselves that we've already seen like this. One is Base Point Capital that just signed $3 billion over 3 years. This is to get SMB loans in the loan platform business. The other is an undisclosed party for several hundred million. And we're also introducing home equity lines of credit to the mix meaning LPB mix as well in the coming days. In terms of the overall size and scale and opportunity of our ability to originate into that, we are just starting to originate in a meaningful scale on the SMB side. This is a major market for them to play in. Their first day out the door of talking about this new product which launched weeks ago is them announcing that they're going to be doing what is in the ballpark of $3.5 billion in 3 years and then saying, "Hey, we're going to launch an even bigger total addressable market helocks or home equity lines of credit into LPB as well." This went past most investors and it was like by far the biggest quote in the entire earnings call. I'm just seeing good results. I think it's an unfavorable macro and I'm not looking to rush in right now because this can persist for a while if Iran conflicts continue and inflation is a concern and oil prices are high. I'm not saying that SoFi is a return right now. I'm saying to the people who get frustrated with this company and call for Anthonyotto to be fired or something like this because the stock isn't moving. Realize the execution that he's doing as an operator. The company is doing better than ever. beating your own expectations, beating my expectations. What more could I want? I said, I would be happy if SoFi does this. They did more than this. And then I complain because the market ends up selling off. Make it make sense. I'm very happy with this company. It remains one of the largest positions in my entire portfolio. Third place right now. I'm going to continue to hold. Are they a bank? Absolutely. Are they one of the fastest growing banks in the world? Absolutely.