SOFI - SoFi's Pullback Post-Q4 Earnings Is Justified

2024-02-24 10:00:00 ET

Summary

• SOFI delivered on its GAAP profitability target in FQ4'23, aided by the growing deposits and the elevated interest rate environment.
• However, with the underperformance observed in the tech segment and growing delinquency in the lending segment, we believe that the recent correction is warranted indeed.
• We believe this is especially true since the Fed is expected to pivot by H1'24, likely to trigger headwinds in the online bank's growth over the next few years, as the inflation cools.
• For now, SOFI appears to understand the need to kickstart the lending/ tech segment's growth to counter the near-term headwinds.

We previously covered SoFi Technologies (SOFI) in November 2023, discussing the impressive results across all of its segments, further aided by the returning student loan refinancing as the US federal student loan repayment restarted from October 2023.

Combined with the growing bank deposits, the contribution to its lower cost funding, and the promising reversal in its GAAP profitability, we had maintained our Buy rating then....

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