Decent Q1 for SoFi; Lowering Fair Value to $15

No-moat rated SoFi Technologies (SOFI) announced decent first-quarter results, though the report was marred by soft guidance and an unintended early release of the report itself. SoFi’s revenue grew 68.5% year over year and 15.7% sequentially to $330 million. That said, SoFi continues to spend aggressively, and despite strong revenue growth, the company reported a net loss of $0.14 per share. Along with the release the company raised its 2022 revenue guidance to between $1.505 billion and $1.510 billion, though its second-quarter guidance of $330 million to $340 million in revenue and $5 million to $15 million in adjusted EBITDA was lower than our expectations.

As we incorporate these results, we are lowering our fair value estimate to $15 from $17. Of the decrease, $1 was due to lower medium-term mortgage origination estimates as the combination of high real estate prices and rapidly increasing interest rates hit mortgage origination levels industry wide. The remaining $1 decrease came from higher expense and lower financial service revenue assumptions.

SoFi’s strongest segment during the quarter was its lending business, which saw its revenue increase 18.3% from last quarter to $253 million. SoFi benefited from both strong loan origination income, which increased 42% from the prior-year period, and higher net interest income, which grew 101% to $94.9 million. The growth in net interest income is of particular note, as increasing interest income is a key part of SoFi's strategic plan, and the main motivation behind its bank charter. SoFi has only recently begun to issue loans through its bank, allowing it take advantage of its $1.2 billion in low-cost deposits, which should add an additional tailwind to interest income in 2022. On a less positive note, the strength in SoFi’s lending arm was entirely due to its personal loans. While personal loan origination grew 151% from last year to $2 billion, student loan and mortgage origination fell 2% and 58%, respectively.