SoFi’s stock pops 20% as earnings bring numerous positive surprises

SoFi’s stock pops 20% as earnings bring numerous positive surprises

Company ups its full-year outlook and discloses the sale of some loans

Shares of SoFi Technologies Inc. were surging 20% in Monday morning action after the financial-technology company upped its earnings outlook for the full year while beating expectations for the latest period.

The company also disclosed $340 million in whole-loan sales, a move that seemed to sit well with Wall Street given concerns coming out of the prior earnings report about a lack of loan sales.

SoFi’s SOFI, +19.90% loan sales in the latest quarter came even as Chief Financial Officer Chris Lapointe suggested on the earnings call that the company would also continue to hold loans.

The company aims to “always maximize returns on loans that we originate” and to maximize returns on equity, he said. “That’s going to take different forms … given the market environment that we’re operating in at the time. This quarter, we ended up doing a few small sales to keep channels open, but we remain very focused on maximizing returns, which means holding these loans for a longer period of time.”

Another highlight, in the view of analysts, was SoFi’s increased outlook. The company now expects $333 million to $343 million in adjusted earnings before interest, taxes, depreciation and amortization (Ebitda) for the period, it said — above a prior forecast that called for $268 million to $288 million.

“While the stock is near technical highs, the raised guidance and stronger margins (particularly in the financial services segment) present a clearer path towards profitability” by the end of the year, wrote Keefe, Bruyette & Woods analyst Michael Perito.

Dan Dolev of Mizuho said that “the sizable increase in [the full-year] guide is a sign of strength.”

For the second quarter, SoFi generated a net loss of $58 million, or 6 cents a share, compared with a loss of $106 million, or 12 cents a share, in the year-earlier period. Analysts tracked by FactSet were modeling a 7-cent loss on a per-share basis.

SoFi’s revenue rose to $498 million from $363 million, while the FactSet consensus was for $486 million on a GAAP basis.

SoFi reported the addition of more than 584,000 new members during its second quarter, along with 847,000 new products.

Total deposits for SoFi grew by $2.7 billion to reach $12.7 billion by the end of the quarter, and 90% of deposits were from direct-deposit members.

Origination volumes for SoFi’s personal-loan business jumped 51% from a year before to $3.7 billion, marking a company record. Personal-loan originations were up 27% sequentially.

“This strong performance was aided by years of investment in technology to automate and accelerate the application-to-approval process for qualified borrowers and constant testing of risk controls and underwriting models to maintain high credit quality and strong returns,” the company said in a release.

Student-loan origination volumes were down 1% on a year-over-year basis to $395 million and “continued to reflect the uncertainty around federal student loan payments,” according to the release. Home-loan originations declined 27% from a year before, to $243 million, though they almost tripled on a sequential basis as SoFi “began to benefit from the technology platform and overall loan capacity from our acquisition at the beginning of the quarter.”

The company reported 129 enabled-client accounts for its technology-platform business as of the second quarter. Galileo, part of that business, signed five new clients in the period.

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