Generational customers
While banks tend to market to generational customers, SoFi’s core lending business naturally caters to students. The Company is building its eco-system bringing together generational customers at the start of their financial lives with the goal of selling its products throughout their lifetime. The strategy is working as the company continues to post double-digit growth across the board. Student loans literally lock in a student customer for the term of the student loan and can sell more services in the meantime. These are “hot leads” as her customer base continues to grow with greater brand recognition. SoFi competes with individual competitors that offer competing financial products and services like Robinhood (NASDAQ: HOOD) for stock trading, Charles Schwab (NYSE: SCHW) for retail investors, Coinbase Global (NASDAQ: COIN) for crypto trading, Bank of America (NYSE: BAC) for banking and mortgages, Ally Financial (NYSE: ALLY), Upstart Holdings (NASDAQ: UPST) and Lending Club (NYSE: LC) for lending.
Double-digit growth indicators
The company reported an adjusted earnings per share (EPS) loss of (-$0.09) missing analyst consensus estimates for a loss of (-$0.07) from (-$0.02). Total revenue rose 51.3% year-over-year to $419.26 million from $391.78 million according to consensus analyst estimates. GAAP net revenue increased 56% to a record $424 million. Adjusted EBITDA increased 332% year-on-year to $44 million. Sofi added 424,000 new members for a total of $4.4 million, up 61% year-over-year. New product additions increased 69%, to 635,000, to nearly 7.2 million. SoFi makes money from net interest income on deposits and from holding loans. Total deposits grew 86% to $5 billion and 85% of SoFi Money deposits came from direct deposit members. The Company operates three segments, Lending, Financial Services and Technology. Loans consist of student, personal and home loans and grew 24% year-over-year to $301.7 million in net income, driven by record personal loan demand of more than $2.8 billion. dollars. Financial Services grew 83% to 5.9 million products and net revenue grew 288% to $49 million. These were SoFi Money growth of 79%, SoFi Investor growth of 68%, and SoFi Relay growth of 113%. Accounts enabled with the technology platform grew 40% year-over-year to 124.3 million, generating 69% year-over-year revenue of $84.8 million.
Raised top line guidance
The company raised its adjusted revenue forecast for fiscal year 2022 by $1.517 billion to $1.522 billion, from analysts’ consensus estimate of $1.50 billion. SoFi CEO Anthony Noto said, “Thanks to this growth in high-quality deposits, we have benefited from a lower cost of funding for our loans. Our deposit funding also increases our flexibility to capture additional net interest margin (NIM) and maximize returns, a key advantage given the significant macroeconomic uncertainty. In its second full quarter of operations, SoFi Bank, NA generated approximately $29 million in positive GAAP net income with an 11% margin.
Here’s what the charts say
The weekly candlestick chart for SOFI illustrates the decline of the downward price channel that spawned the weekly crossover of the 5-period exponential moving average (EMA) to the 50-period MA in November 2021. This breakdown is occurred on the $18 break and continued to sell-off until it staged a rally from June 2022 to August 2022 reaching a high of $8.52 (B) before falling back to a new low at $4.82 (C). From there, it rebounded again to peak at $6.47 (D) for a retracement that attempts to hold above the weekly market structure (MSL) trigger at $5.35. This weekly falling wedge pattern has a potential breakout if buyers push it through the $6.14 resistance on volume and hold the level as support on the pullbacks. The weekly stochastic has crossed again in an attempt to rebound through the 20 band. The weekly 20-period EMA resistance lies at $5.98 and the 50-period downside resistance lies sits at $8.21. The upside target is the distance between points A and B ($3.32) added to the breakout level at $6.14 for a potential move to $9.79 (AB+D). If the stock breaks past the lower trendline, the pullback support levels will hold at the $4.42, $3.85, $3.42, and $2.35 price levels.
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