Why SoFi Technologies Stock Crashed 12.5% After Earnings

SoFi Technologies (NASDAQ: SOFI) stock tumbled 12.5% through 9:45 a.m. ET Tuesday despite beating on top and bottom lines in its earnings report this morning.

Heading into earnings, analysts forecast the online bank would earn $0.04 per share on $632.3 million. In fact, SoFi reported a profit of $0.05 per share, and its revenue exceeded expectations, at $697.1 million.

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SoFi continued to post impressive growth in the third quarter, with members rising 35% year over year to 9.4 million, although revenue grew slower at 30%. CEO Anthony Noto called the company’s growth trends “durable,” and noted that Q3 “was the strongest quarter in our history.”

SoFi also noted increases in credit quality. Personal loan charge-offs declined 32 basis points to 3.52%, and delinquencies on personal loans fell 7 basis points to 0.57%. Both metrics should tend to boost profits at the company. Indeed, net interest income grew 25%.

Growth was fastest in the company’s financial services and tech platform segment, where sales rose 64% year over year. This segment now makes up nearly half — 49% — of SoFi’s business. And it’s apparently a very high-margin business for SoFi. Instead of losing $0.29 per share, as it did in Q3 a year ago, SoFi posted a $0.05-per-share profit this time around, its fourth straight quarterly net profit.

Four quarters of positive profits, however, still leaves SoFi stock looking kind of pricey. In total, the company has racked up $0.12 per share over the past year. But relative to a stock price of almost exactly $10 per share, that works out to a P/E ratio of 83.

Is that a fair price?

Management says 2024 revenue will grow 22% or 23%, with membership rising 30%. Earnings will mimic the trailing-12-month number of $0.12 per share — but analysts see profits more than doubling to $0.25 per share next year. As strange as it sounds, paying 83 times earnings for a 100%-plus growth rate may actually make SoFi a cheap stock.

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