SoFi Reports Strong Q4 Earnings

No-moat SoFi Technologies (SOFI) reported strong fourth-quarter results with impressive user growth and student loan origination volumes that came in above our expectations for the quarter. SoFi met its net revenue guidance for the quarter of $272 million to $282 million with fourth-quarter adjusted net revenue of $280 million, a 54% increase year over year. As we incorporate these results, we will maintain our $20 fair value estimate for SoFi.

The largest driver behind the company’s growth was strong personal loan volume, with origination volume rising 168% from last year's quarter to $1.65 billion. Student lending showed unexpected strength prior to the expiration of federal student loan forbearance with origination volume of $1.46 billion, a 50.6% increase year over year. The early start to a recovery lends support to our expectation for student loan volume to fully recover once the CARES Act’s forbearance ends in May, though given the contentious nature of student debt, we expect the politics around debt forbearance and forgiveness to remain a risk point for SoFi.

Outside of SoFi’s lending arm, the company continues to see strong momentum in its financial services segment. The number of SoFi Money and SoFi Invest accounts increased by 275,633 and 361,616 during the quarter to 1.44 million and 1.59 million, respectively. This growth represented a 123% increase SoFi Money accounts year over year and a 200% increase in SoFi invest accounts. User growth and new products drove financial services revenue up 440% year over year to $22 million. SoFi sees its SoFi Money accounts as the primary entry point for new users into its ecosystem and the increased userbase along with the breadth of SoFi’s product offering allows the company cross selling advantages to a rapidly growing userbase. This is a core tenet of SoFi's strategic vision and despite the smaller size of this segment, the growth seen in this arm of its business is an important success for the firm.

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