Digital financial services company Sofi Technologies (NASDAQ:SOFI) stock is gaining a new resurgence as it attempts to climb towards all-time highs. The fintech company has expanded its financial services to become a one-stop shop for banking, investing, lending, budgeting, wealth planning, and credit cards suited for Millennials and Gen-Z customers. The Company also acquired the digital payment processing platform Galileo to expand total users to over 2.5 million.
Topline revenues rose by 74% in its Q2 2021 earnings results underscoring its hypergrowth stage with the pandemic behind them. Sofi is the fifth largest “neobank,” a digital bank without physical branches. It’s also the only major digital bank to offer loans to its members from personal, home equity to student loans. Investors await the granting of a national bank charter license to further bolster its growth. Prudent investors looking for a foothold into transfer and growth of wealth for the Millennial demographic can watch Sofi Technologies for opportunistic pullbacks to gain exposure.
Q2 FY 2021 Earnings Release
On Aug. 12, 2021, Sofi released its fiscal second-quarter 2021 results for the quarter ending June 2021. The Company reported diluted adjust earnings-per-share (EPS) loss of (-$0.48) excluding non-recurring items. Total revenues rose 74% YoY to $237.2 million versus $218.60 million consensus analyst estimates. Member growth rose 113$ YoY. Total products revenues grew 123% YoY to 3.7 million. The Federal Student loan moratorium caused Sofi to miss and hurt upside guidance.
Sofi CEO Anthony Noto commented,
“The second quarter proved to be another quarter full of milestones for SoFi. We exceeded our financial expectations, delivering record-adjusted quarterly net revenue and our fourth consecutive quarter of positive adjusted EBITDA. We drove our 8th straight quarter of accelerating member growth, with even faster growth in cross-buying from existing members, increased our Galileo account base to nearly 79 million, and raised nearly $2 billion in our successful transition to a public company. We accomplished all of this by focusing on our members and our mission to provide them with the right financial products, services, and advice for every major financial decision in their lives and every day in between.”
Downside Earnings Guidance
Sofi issued downside earnings guidance for Q3 2021 with revenues expected between $245 million to $255 million versus $270.15 analyst estimates with an EBITDA loss ranging between (-$7 million) to (-$3 million). The Company reaffirms full-year 2021 revenues to come in around $980 million beating the $973.74 million analyst estimates with adjusted EBITDA of $27 million expected.
Conference Call Takeaways
CEO Noto set the tone,
“In the quarter, we demonstrated our commitment to constantly iterate across four factors, fast selection, constant demands to drive compounding innovation. Here are just a few examples of what we did in the quarter. Our products are 100% digital, and there are infinite ways to tailor them to specific members’ needs. To ensure our members get the right loan for them. We launched a next-gen credit model and re-engineered our fraud and income verification processes. This drove a 30% higher approval rate with the same credit box, leading to a 60% increase in funnel conversion and improved Net Promoter Score, all with zero negative impact on credit quality. Across lending, we continue to invest in automation to make the loan application process easier, faster and lower touch. In Q2 more than 50% of personal loans processes were 100% automated.
"That compares with less than 30% one year ago, which drove lower cost per loan and shortened time to fund to two days from four days last year and nearly a week a few years ago. In student loans, we work to align with members' individual needs throughout the pandemic, specifically by introducing this snooze feature. The snooze feature allows borrowers to lock in a low rate on a student loan today. It's delaying the starting payments until the CARES Act loan deferral program ends in January 2022.
"In SoFi Money, we enhanced our direct deposit offering by adding a two-day early paycheck to earlier enhancements like free overdraft protection, auto-save, and roundup features. And SoFi invest members asked for more cryptocurrency selection. So, we added 16 points to the offering. We also have the ability to redeem SoFi reward points earned on all of SoFi products into cryptocurrency. And we were one of the first offers with our new IPO investment center. Also, in Invest we added to our already strong SoFi ETF offering by launching SoFi weekly the first-ever equity ETF that pays weekly dividends, this joint SoFi TJF or fixed income ETF which pays a dividend every Friday.
"At Galileo, we are near completion on a 15-month project to build out a new cloud computing environment to replace the on-premises environment and are now in Q3 focused on the migration of existing clients to the cloud, which we filed by onboarding new clients straight to the cloud. We also continue to grow the Galileo partner base, signing up 22 new partners in the first half of ‘21 well 12 of those in Q2, including some focused on enterprise and cryptocurrency.
"Finally, we continue to iterate and innovate on our unique rewards program by adding additional reward triggers when members set up returning purchases or return deposits in SoFi Invest or direct deposit in SoFi Money, or when members use the app to take actions that make their financial lives better. Since launch, rewards are contributing meaningfully to cross-buy and engagement.”
SOFI Opportunistic Pullback Levels
Using the rifle charts on the weekly and daily time frames provides a precise view of the price action playing field for SOFI stock. The weekly rifle chart peaked off the $21.81 Fibonacci (fib) level near-term as weekly stochastic mini pup continues to drive the active uptrend. The weekly 5-period moving average (MA) support is rising at $18.05 with 15-period MA rising at $16.13.
The weekly stochastic mini pup is nearing the 60-band as it continues its oscillation up with daily upper Bollinger® Bands (BBs) at the $23.67 fib. The weekly market structure high (MSH) sell triggered the $22.25 breakdown. The daily rifle chart has been up-trending since the market structure low (MSL) buy triggered above $16.49. The daily 5-period MA is stalling at $20.74 with a rising 15-period MA at $18.70. The daily stochastic is forming a high band mini inverse pup attempt at the 90-band to set up a pullback.
Prudent investors can watch for opportunistic pullbacks at the $19.01 fib, $18.31 fib, $17.52 fib, $16.84 fib, $15.65 fib, and the $14.65 fib. Upside trajectories range from the $25.40 fib up towards the $33.27 fib level.