SoFi Technologies (NASDAQ: SOFI), a digital financial company that offers a range of products and services, including banking, lending, investing, and insurance, saw its stock plunge 10% on January 27, after the company announced its Q4 results. The results were actually above the street estimates, but the outlook fell short of expectations. The company reported revenue of $739 million and earnings of $0.05 per share, compared to the consensus estimates of $679 million and $0.04, respectively.
SOFI stock is up a solid 62% since the beginning of 2024, outperforming the broader S&P500 index, up 26%. A continued rise in its user base has kept the investors happy. But, if you want upside with a smoother ride than an individual stock, consider the High-Quality portfolio, which has outperformed the S&P, and clocked >91% returns since inception.
SoFi Technologies revenue of $739 million in Q4 reflected a 24% y-o-y growth. The top-line growth was driven by higher fee-based revenues, as the company saw a 34% rise in its total member base to 10.1 million now. Looking at segments, financial services products sales were up 84% y-o-y to $257 million, technology platform revenue was up 6% to $103 million, and lending segment sales were up 22% to 423 million.
Looking forward, SoFi expects its Q1 sales to be between $725 and $745 million, and earnings of around $0.03 per share. For the full-year 2025, the company expects sales to be over $3.2 billion and earnings to be between $0.25 and $0.27 per share. This implies at least 23% y-o-y top-line growth.
Notably, SoFi’s Galileo – a payment processing platform that provides services to other fintech companies – has secured a significant government contract to handle processing for Direct Express, a prepaid debit card system that serves 3.4 million federal benefit recipients. This partnership with the U.S. Treasury Department will be implemented this year.
Looking at SOFI stock, it declined 10% recently, as the Q1 EPS outlook of $0.03 fell short of the $0.05 consensus estimate. But, even if we look at a slightly longer period, the increase in SOFI stock over the last four-year period has been far from consistent, with annual returns being considerably more volatile than the S&P 500. Returns for the stock were 27% in 2021, -71% in 2022, 116% in 2023, and 55% in 2024.
The Trefis High Quality Portfolio, with a collection of 30 stocks, is considerably less volatile. And it has comfortably outperformed the S&P 500 over the last 4-year period. Why is that? As a group, HQ Portfolio stocks provided better returns with less risk versus the benchmark index; less of a roller-coaster ride, as evident in HQ Portfolio performance metrics.
Given the current uncertain macroeconomic environment around rate cuts and changes in the White House, could SOFI face a similar situation as it did in 2022 and underperform the S&P over the next 12 months — or will it see a strong jump? Despite its recent fall, SOFI stock seems to be fully valued. At its current levels of $16, SOFI is trading at 6.6x trailing revenues, higher than the stock’s average P/S ratio of 5.2x over the last three years.
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