By SoFi Technologies has experienced significant growth this year as the resumption of student-loan payments looms. As the company prepares to announce its earnings, investors eagerly await confirmation of this optimism.
Second Quarter Expectations
In the second quarter, SoFi is projected to report a loss of 7 cents per share. Additionally, analysts predict consolidated non-GAAP adjusted net revenue of $474 million. On the lending front, estimations include personal loan origination volume of around $3 billion, student loan volume of $518.8 million, and home loan volume of $128.8 million. Notably, while personal and home loans are expected to increase from Q1, student loans are anticipated to decline.
Previous Earnings and Momentum
Following the announcement of its first-quarter earnings on May 1, SoFi’s stock price surged by approximately 69%. Notably, the company performed well during this period. Q1 results revealed a narrower-than-expected loss of 5 cents per share and revenue amounting to $460.2 million. Personal loan originations increased by an impressive 46% compared to the previous year. However, student loan volume experienced a decline. Overall, both members and products witnessed growth.
Impact of Student-Loan Forgiveness News
Another factor contributing to SoFi’s momentum was the buzz surrounding student-loan forgiveness. The company’s stock price doubled as Congress made moves to resume repayments and President Biden’s forgiveness plan was halted by the Supreme Court.
Analyst Perspectives
When it comes to the outlook for SoFi’s stock, analysts hold various opinions. According to FactSet, 32% rate it as a Buy, 58% as Neutral, and 11% as Sell. A J.P. Morgan analyst, Reginald Smith, rates the shares as Neutral with a price target of $6. He anticipates strong second-quarter numbers in terms of member and deposit growth. However, Smith expresses concern over the potential impact of climbing Treasury yields on profit growth and guidance. Additionally, he questions whether expectations for refinancing student loans upon payment resumption may be overly optimistic.
SOFI Shares and the Student Loan Refinance Opportunity
“SOFI shares have shown strong momentum in recent weeks due to the excitement surrounding the student loan refinance opportunity,” stated Smith in a recent report. However, Smith also expressed the belief that this opportunity may be smaller than some investors realize.
In a report from last month, J.P. Morgan analysts, led by Smith, revealed that the company management values the refinance opportunity at approximately $200 billion over several years. However, the analysts predict that the actual figure may be closer to $90 billion, less than half of the projected value.
SoFi CEO, Anthony Noto, also shared his thoughts on this opportunity earlier this month. He expressed confidence in the significant demand for individuals who are seeking ways to lower their monthly costs, and specifically mentioned the potential for some borrowers to substantially reduce their overall loan expenses.
Established in 2011 and taken public on June 1, 2021, through Social Capital’s special purpose acquisition company, SoFi experienced an initial opening of shares at $21.97 and closed at $22.65, according to Dow Jones Market Data. While the stock has seen a strong rally this year, the decline has been sharp, with stock prices ending last Friday at $9.55.
Originally focused on refinancing student debt, SoFi transformed into a full-service bank following its acquisition of Technisys SA last year. Despite its current volatility, investors should brace themselves for potential fluctuations in stock prices when earnings reports are released.
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