I Can't Stay Quiet on SoFi Stock After Blowout Earnings

Hey, welcome back subscribers. My name is Ali. This is my world of stocks and uh hey, we got to talk about SoFi Technologies today because they just dropped their latest earnings report this week. And uh after three straight quarters of frustrating postnings selloffs uh where the stock actually dropped 6%, 15% and 9% right after reporting each of those. Well, uh, this time the stock finally broke out on some amazing results. And yet, even here, it is still down around half its value from the very top, for which I think is still a great time to be adding shares for SoFi long-term. So, today, we're going to break down five specific reasons why I'm even more bullish now uh than I've ever been about SoFi's long-term future after this blowout earnings report. So, let's go ahead and jump straight into it. All right, guys. Now, reason number one, well, let's not beat around the bush. We have to start with those headline numbers that just destroyed almost every important metric in the quarter when looking at their earnings. Now, sales, for example, uh they jumped a monstrous 44% year-over-year to a record-breaking 1.3 uh 1.37 billion uh easily crushing the 1.25 billion that was expected by analysts. Now, even better, their profitability is scaling up even faster than their sales with adjusted IBIDA skyrocketing by 70% year-over-year, jumping up to a record high of $470 million, while their IBIDA margins expanded from 29% last year up to now 34% today. So, everything looking very good there. This also gave them a rule of 40 score of nearly doubled head amount at a gigantic really 79%. It's very strong, very good, exactly what you want to see in a tech stock like this. And that actually marks their 20th consecutive quarter of beating the rule of 40. Now, in the bottom line, uh this marks SoFi's 12th straight quarter of positive profitability, where adjusted net income soared by 75% year-over-year, climbing to another record high of 243 million. And when you break it down by segment, well, you can see that pretty much everything is firing on all cylinders right now for them. Uh, financial services, for example, revenue grew 25% year-over-year, while their feebased revenue, which is, you know, it's going to be higher margin cuz it's uh so capital light in its nature. But that soared by 40% year-over-year to a record more than half a billion dollars. That now makes up um 42% of SoFi's entire revenue mix. That is a fantastic sign. That is exactly what I wanted to see out of this report. Um, second, their core lending segment also continues to outperform. Revenue exploded by 68% year-over-year, which easily beat analyst estimates by uh like nearly $und00 million. And it was driven by an all-time record of um $16.9 billion in total loan originations, which was also up 71% year-over-year. Now those loans by the way are mostly among personal loans. There's also of course you know student loans, home loans but uh the largest amount is going to be in personal loans. And the interesting interesting thing about that is that you know for the longest time that really has been one of the biggest arguments not and not a bad one either, but it's been one of the biggest arguments coming from the bear camp from from bearish uh traders who don't like SoFi stock. And they would really argue that, you know, with all of this sticky inflation and high interest rates, that would cause SoFi's borrowers to start defaulting on all of those personal loans. So, they saw it as like actually a high risk um like a risk factor for SoFi. [snorts] But surprisingly, um SoFi's credit quality actually improved in the quarter 2 even with these crazy conditions, which was um very impressive to see. So, um their net charge off rate actually dropped from 2.6% a year ago down to 2.26% 26% today, while 90day delinquencies also fell to just 0.4%. Meaning that these aren't uh you know, these are not like um super risky borrowers that we're talking about here. Rather, they actually averaged um income of $150,000 with a credit score is on average above 740. So, they're going to be, you know, pretty reliable borrowers as long as the economy holds up even just kind of even just how it is right now, which is not like definitely not great. But, um, you know, things could obviously get much worse. But, it would really take like the whole economy like really collapsing all of a sudden, I think, to really sink SoFi um with how strong they're performing. Now, you know, to be fair, that is always going to be one of those concerns with any of these type of investments that, you know, that is something that could always potentially happen at any point. But, um, really the biggest critique that bears are trying to make about SoFi now after all of this is that really all they got really to argue is that their technology platform, um, is not doing as well. It actually declined in the quarter. However, um, that's simply the result of losing Chime as a customer late last year. So when you exclude for that that customer losing that customer uh the segment actually grew and rebounded quarter over quarter it climbed from 75 million in Q1 to 84.5 million in Q2 and now it's at 87.4 million in Q3 and they're relaunching that brand under um SoFi Tech Solutions as well. Now that does bring us to reason number two though I did go a little long on reason number one. I'll try to go faster on these other ones. But reason number two, uh the forward-looking guidance is um looking even better. Uh when you look a little bit further out, I see back in Q2, the market actually punished SoFi because even though they raised their sales outlook, they didn't raise their fullear profit guidance. But this time around, you know, management really, in my opinion, didn't hold back. Uh they raised their revenue guidance again for the full year from their previous range of 4.75 to 4.85 85 billion all the way up now to 5.04 billion. So over 5 billion which would translate to growth of 40% year-over-year. Very very strong. Uh for adjusted IBIDub they rose it to 1.66 billion which would translate to monstrous growth of uh 57% year-over-year with also EPS guidance of 61 cents a share. And that would be 56% growth year-over-year too. And it didn't even stop there. for 2027. They're also guiding for another 27% rise in sales to 6.4 billion with adjusted IBIDA rising 35% too, up now to $2.24 billion. And they predict adjusted EPS will be even higher than both of those at 48% growth year-over-year, up to 90 cents a share, which is significantly higher than the 82 cent estimate that was coming from analysts. So, they easily beat on guidance as well there. And again, my biggest thing um really like my biggest kind of takeaway from all of that is just that, you know, revenue is projected to grow um by 27%. But EPS will grow much larger at closer to like 50%. Uh that means that yeah like the big margin expansions that we're seeing right now um those are going to continue to rise and outperform I think here in the future because as their business scales larger I just think you're going to see that they're actually capable of becoming much more profitable over time too and it's the biggest kind of bullish argument that that I've always really made about SoFi is in their profit potential that I always felt like the the market was kind of sleeping on. Well, that brings me now to reason number three. Um, the unstoppable like moat, the overall customer experience and just the underlying business of SoFi that is just so incredibly strong because none of those financial numbers happen by accident. This is the direct result of what SoFi calls their productivity loop where because SoFi is growing in popularity, well, their unaded brand awareness has now more than doubled since 2022 to an all-time high of nearly 12%. And that organic brand recognition is what helped bring in a record 1.2 million new members in just the last three months alone. Man, I'm struggling just to get any members to our Discord. You guys got to sign up, by the way, if you haven't already. Sign up, become a member, join our Discord. Um, we're not going to get numbers like SoFi at over a million in a quarter, but you know, it's a fun place to hang out and with other like-minded investors, with me. I'd love to see you there. So, links are down below. Uh, sign up on Patreon. I didn't plan this this little like ad read, by the way. I'm just um I probably shouldn't um be rambling on about it, but let's go back to the report. So, they added a record 1.2 million new members in just the last 3 months alone. Uh that pushed their total user base up 35% to over 17 million now that they've got in total. And even better, you know, once people join, um they don't just open a checking account and and take off. Uh um they really stick around and sign up for more products over time. Uh because when you look at the numbers here, over half of all new products that were taken out this past quarter, they actually came from existing members, adding things like a credit card, you know, taking out a loan, using SoFi invest, you know, investing in different things, maybe signing up for a Roth IRA, things like that. Well, that flywheel effect pushed average products per member to an all-time high with CEO Anthony Notto saying that they see a clear path to a 100 million total products by 2030, which would be a 4x increase from today. I mean, it'd be huge. Now, powering this entire machine is SoFi themselves actually as a official national bank, meaning they can hold their own member deposits and actually use them themselves for their own products, too. Well, this latest quarter, those member deposits surged by nearly $6 billion to cross 51 billion in total. And the result is that now 93% of all SoFi loans are actually being funded directly by SoFi's own and much cheaper customer deposits. And that's instead of having to use, you know, expensive Wall Street debt. And that's just saving the company gigantic amounts of money on interest and fees and other things. And it's thus helping drive up those really nice margins that we just talked about earlier to now record highs. And I think, you know, again, I think that's only going to continue in the future. Speaking of the future though, that brings me to reason number four, which is SoFi's relentless product innovation where they're expanding much further beyond their student loan roots into high margin crypto, stable coins, uh, business banking, even artificial intelligence, too. Now, over the past few quarters alone, they became the first bank to launch consumer crypto trading and issue their own cashback stable coin, SoFi USD, even being the first to actually go live with uh stable coin settlements across Mastercards global network, which is a huge, it's a giant deal. Um, they just launched SoFi earn, which is the first and only bankisssued tokenized deposit for everyday consumers. They partnered with Payword to connect traditional banking directly with digital asset markets. And they launched SoFi pay using blockchain tech to let members and international money transfers uh to send uh international money transfers across more than 30 countries at much lower cost too. Now on the AI front, they launched SoFi Coach, an AIdriven financial assistant built right into the app. And in commercial banking, they launched small business loans and 24/7 APIdriven fiat and crypto banking for companies of any size. When you put all of these new launches together, it just gives SoFi even more various feebased revenue engines that uh that they can rely on long term. These are these are revenue streams that legacy brick-and-mortar banks, they just simply can't keep up with these. In many cases, they're not even trying to. Like this is really one of the things that I love so much about SoFi that I feel differentiates them as a disruptor in these legacy markets. The fact that they're always willing to try new things to expand to grow to disrupt when legacy banks are just sitting on their thumbs just not caring and just you know trying to collect the same old profit that they always did but they're not looking to expand or grow further. So is not like that. I that's really why I feel like they are truly a disruptor in these legacy markets. Well, speaking of legacy markets, finishing up with reason number five is that SoFi continues to trade at an insanely low valuation. Typically one that is, you know, reserved for older legacy banks, but with insanely high growth that those banks could only ever dream of. A case in point, even after this week's rise in price after the the earnings report, um SoFi stock is still technically down about half its entire value from the top. And that's left their PEG ratio which factors in future growth the the you know that's really the the strongest the strongest asset of that SoFi has is is their growth is what differentiates them. Well when you factor that into the valuation you get the PG ratio it is sitting at an incredibly low 0.65. We consider a PG of one to be a great value. This is 0.65. It's much lower than than anything we would value it at. And it's also about 40% cheaper than the sector median. Again, the finance sector has always been one of the cheapest ones to begin with. So, the fact that SoFi is even lower than that, it just simply tells me that the market continues to sleep on all the future potential here that SoFi actually holds. And I really think in the future over the longer term, this is a stock that should be north of $30 per share. I think you know easily they could um break north of that again in my opinion and hopefully you know much higher than that over the longer term. I get that it's been you know probably held back because of the weak economy all the volatility in the economy so many things going on and I think that's put a lot of pressure on a stock like this that is you know all kind of finance and economy based but that is why I try to stick to long-term investing. I really don't care what happens this year. So stock could go down to $5 a share. I couldn't care less. I would actually welcome it because I would love to buy SoFi stock in the single digits, you know, again, I would love to be able to get it at incredibly low prices that we haven't seen in forever, you know, in a long time. So, um, that really doesn't matter to me. This is a stock that I want, um, to hold many years into the future. And I'm talking very, very much into the future, even past a decade from now. It's really a stock that I want to hold ideally into like retirement um that far out because that is how much potential I think they have. Now, obviously things can always change at any moment. So, you know, we reevaluate all the time, right? Like things can change for sure and and management can screw things up and we have to we have to get out of the a stock, go to, you know, go to a different stock. All that kind of stuff is always on the table. There's always outliers to all of this. But I'm just saying from where I stand right now, from where I can see things and where I see things heading for this company, I'm still I'm just as bullish as ever. I mean, there's nothing that has happened that has made me less bullish about SoFi's future. Uh, in terms of everything that has happened, I'm very optimistic about their long-term future. But hey, those are just my thoughts, my own opinions. Um, I could of course be wrong about any of this. So, as always, you got to do your own extensive research and due diligence. make your own decisions out there in the market for whatever fits you and your own portfolio best. But I'd love to hear what you think about SoFi down below. What do you think about their earnings? Do you own the stock? Are you buying the stock? Or are you just staying away? I'd love to hear from you. Let me know down in the comments. And hey, while you're down there, if you don't mind, um there are some links for you. If you want to support the channel, you can become a member. You can um just hit the join button on YouTube or you can go through Patreon. Through Patreon, you actually get early commercial free access to all my videos. So, you know, it's usually what I recommend more, but they're both about five bucks. They're both five bucks a month where you can get um access to our Discord, so you can hang out with me, other like-minded investors. You get access to my daily stock trade where I post a new stock purchase every single day. You get all of that for just five bucks a month. It's it's a pretty good deal. And I'm always looking to add new value and stuff to it, too. 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