SOFI - SoFi's Diversification Strategy Pays Off: Here's Why You Should Buy The Dip
2024-05-10 15:05:07 ET
Summary
- SoFi reported strong Q1 2024 earnings, beating revenue and EPS estimates and raising annual guidance.
- Despite positive results, the stock dropped 9.27% after earnings, and the decline continued into the following week.
- The company's diversified business and growth in other segments offset a decline in lending revenue.
I last wrote about SoFi Technologies ( SOFI ) on February 5, 2024, several days after it jumped around 20% in response to great earnings and almost immediately dropped back to its previous price before reporting its fourth-quarter 2023 results. I had recommended a buy following that pullback.
SoFi reported its most recent results, first quarter 2024 earnings, on April 29, before the bell, and the results looked great. The company beat analysts' revenue estimates by 3.6% and beat analysts' earnings-per-share ("EPS") estimates for $0.01 quarter by generating an EPS of $0.02. The company also raised its annual guidance for 2024. Most metrics underlying the revenue and earnings beats justify buying the stock. Although lending revenue receded by 2%, the company's other segments have grown large enough that the company still was able to increase revenue at a rate above 25% for the 12th consecutive quarter. SoFi's Technology and Financial Services segment combined grew over 50% year-over-year. SoFi had anticipated that the loan business might decline in a relatively challenging economic environment and has positioned its loan portfolio accordingly. These results show that the company has diversified its business enough to maintain profitable growth even when the cycle is unfavorable to lending. Yet, the stock dropped 9.27% on the day it released earnings, and over a week after earnings, it is still down 10% as of the market close on May 8....
SoFi's Diversification Strategy Pays Off: Here's Why You Should Buy The Dip