Should You Buy SoFi Technologies (SOFI) Ahead of Q1 Earnings?

SoFi Technologies, Inc. SOFI will report its first-quarter 2024 results on Apr 29, before the bell.

Let’s check out how SOFI is currently doing.

Stock Performance & Valuation

The stock gained 30% over the past year. Although an impressive gain, outperforming the Zacks S&P 500 composite’s rally of 21.8%, the stock has underperformed the 47.3% rally of the industry.

On the basis of EV-to-EBITDA, SOFI is currently trading at 13.55X compared with the industry’s 57.18X. If we look at the Price/Earnings ratio, SOFI shares currently trade at 55.98X forward earnings, well above the industry’s 38.01X.

SoFi Technologies, Inc. Price SoFi Technologies, Inc. Price

SoFi Technologies, Inc. price | SoFi Technologies, Inc. Quote

Sales and Margin Performance

The company had an exceptional year in 2023. It saw a remarkable 35% increase in adjusted net revenue, reaching a record high of $2.1 billion. This indicates a strong demand for services. Adjusted EBITDA soared by 200% year over year, reaching $432 million. This significant increase demonstrates improved operational efficiency. SOFI achieved a remarkable 54% incremental margin and a consolidated EBITDA margin of 21% for 2023. These margins exceed the company’s long-term target of 30%, indicating efficient cost management.

Members and Products

Members and products both experienced robust growth rates of more than 40% in 2023. The company added 2.3 million new members in 2023, bringing the total to 7.5 million members. Additionally, 3.2 million new products were added, resulting in a total of 11 million products by the end of the year.

Liquidity

SOFI’s current ratio (a measure of liquidity) was at 1.04 at the end of fourth-quarter 2023, lower than the prior quarter’s 1.52 and the year ago quarter’s 2. A current ratio of more than 1 often indicates that a company will be easily paying off its short-term obligations. However, a decreasing current ratio does not bode well.

Sales and EPS Growth Prospects

The Zacks Consensus Estimate for SOFI’s 2024 sales and EPS implies year-over-year growth of 15.5% and 122.2%, respectively. The estimate for EPS has moved north by a penny over the past 30 days.

To Conclude

While SOFI trades at a discount relative to its industry based on EV-to-EBITDA, it looks expensive based on P/E. The company’s liquidity position based on the current ratio remains healthy, but the decreasing trend poses a bit of concern.

Since the stock has risen a whopping 30% in the past year, it may undergo a correction soon, especially when SOFI does not seem poised for an earnings beat. Our quantitative model suggests that the combination of two key elements — a positive Earnings ESP and a Zacks Rank #3 (Hold) or better — increases the odds of a positive earnings surprise. But that’s not the case with SOFI at present, as it has an Earnings ESP of -45.71% and carries a Zacks Rank #3.

Given this backdrop, it may not be a bad idea to wait for this fundamentally strong stock to undergo some correction and offer a better entry point rather than rushing to purchase the stock before Apr 29. This tactic will help you “Buy the Dip.”

Stocks That Warrant a Look

Here are a few stocks from the broader Business Services sector, which, according to our model, also have the right combination of elements to beat on earnings this season.

AppLovin APP: The Zacks Consensus Estimate for the company’s first-quarter 2024 revenues is pegged at $969.9 million, indicating a rise of 35.6% from the year-ago quarter’s reported figure. For earnings, the consensus mark is pegged at 57 cents per share, suggesting a rise of more than 100% from the year-ago quarter’s actual. The company beat the consensus estimate in three of the past four quarters and missed once, with an average surprise of 26.5%.

APP has an Earnings ESP of +2.66% and currently sports a Zacks Rank of 3. The company is scheduled to post its first-quarter results on May 8. You can see the complete list of today’s Zacks #1 Rank stocks here.

Charles River Associates CRAI: The Zacks Consensus Estimate for the company’s first-quarter 2024 revenues is pegged at $160.7 million, indicating 5.1% growth from the year-ago quarter’s reported figure. For earnings, the consensus mark is pegged at $1.4 per share, suggesting a 7.8% rise from the year-ago quarter’s actual. The company beat the consensus estimate in two of the past four quarters and missed on the other two, with an average surprise of 8.1%.

CRAI currently has an Earnings ESP of +0.54% and a Zacks Rank of 1. The company is scheduled to declare its first-quarter results on May 2.

Stay on top of upcoming earnings announcements with the Zacks Earnings Calendar.

Highest Returns for Any Asset Class

It’s not even close. Despite ups and downs, Bitcoin has been more profitable for investors than any other decentralized, borderless form of money.

No guarantees for the future, but in the past three presidential election years, Bitcoin’s returns were as follows: 2012 +272.4%, 2016 +161.1%, and 2020 +302.8%. Zacks predicts another significant surge in months to come.

Hurry, Download Special Report – It’s FREE >>

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

Charles River Associates (CRAI) : Free Stock Analysis Report

AppLovin Corporation (APP) : Free Stock Analysis Report

SoFi Technologies, Inc. (SOFI) : Free Stock Analysis Report

To read this article on Zacks.com click here.

Zacks Investment Research

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

More Related Articles

Info icon

This data feed is not available at this time.

Sign up for the TradeTalks newsletter to receive your weekly dose of trading news, trends and education. Delivered Wednesdays.