SoFi Reports Solid Q4 Earnings

SoFi Technologies Stock at a Glance

• Current Morningstar Fair Value Estimate: $14.50
• Stock Star Rating: 5 Stars
• Economic Moat Rating: None
• Moat Trend Rating: Positive

SoFi Technologies Earnings Update

No-moat-rated SoFi Technologies (SOFI) reported solid fourth-quarter results as the benefit of its impressive deposit growth was partially offset by slower loan origination and weak growth in its technology platform segment. SoFi’s net revenue grew 60% from last year and 7.7% sequentially to $456.7 million. While the company remains unprofitable, its net loss did narrow to $0.05 per share from $0.15 last year, and SoFi now expects to reach profitability by the end of 2023. As we incorporate these results, we maintain our $14.50 fair value estimate and see the shares as undervalued.

SoFi continues to see significant success in its deposit-gathering efforts, with total deposits rising 46% from last quarter and more than 700% over the course of 2022 to $7.34 billion. SoFi’s rapid growth in its deposit base was crucial to its results in 2022 as rising net interest income has been the largest driving force behind the company’s growth in recent quarters. SoFi’s lending arm, its largest source of revenue, grew 54% from last year to $328.2 million, with net interest income increasing 138% to $183.6 million. SoFi’s success in building a large deposit base has enabled this growth by allowing the firm to expand its loan book to $13.6 billion at the end of 2022 from $5.9 billion last year while also expanding its net interest margin 141 basis points to 5.94%.

On a less positive note, SoFi’s loan origination was weak during the quarter, falling 21% from last year and 14.5% sequentially to $2.98 billion. Personal loan volume remains strong, with originations rising 49.8% from last year as record credit card receivable growth increases demand for credit card consolidation loans. This was offset by continued weakness in student loans and mortgage originations, which fell 72% and 84%, respectively, to $405.8 million and $105 million. Federal student loan forbearance continues to be a headwind to SoFi while higher interest rates reduce demand in both of these loan categories.