SoFi Technologies keeps reporting what it describes as record quarters, but Wall Street has not been impressed by these results.
In the second quarter, the fintech company slightly beat expectations. Adjusted earnings were 12 cents per share, just above the 11-cent estimate. Adjusted net revenue rose 40% from last year to $1.2 billion, a bit higher than the $1.1 billion analysts expected.
Even though SoFi beat expectations, investors reacted negatively. The stock fell 8.9% on Wednesday, dropping more than the overall market.
Management stayed positive even though the stock dropped. CEO Anthony Noto said he is confident SoFi can keep growing and delivering strong returns, especially as growth speeds up. The company raised its forecast for adjusted net revenue to about $4.75 billion to $4.85 billion, which means growth of 32% to 35%. This is higher than its previous forecast of $4.66 billion and 30% growth. SoFi also kept its adjusted earnings guidance at 60 cents per share, just above the 59-cent estimate from FactSet analysts.
SoFi’s fee-based revenue, which the company has focused on to be less affected by interest rates, was $472.3 million for the quarter. Results were mixed across different business areas. The financial services division, which includes SoFi Invest and its credit card, had net revenue of $466.3 million, up 29% from last year.
SoFi’s lending business is still a main source of growth, even as the company expands beyond student loans. It brought in $724.8 million in revenue, up 63% from last year, or $711.7 million on an adjusted basis, up 59%. According to Jefferies, default rates for both personal and student loans went down compared to the previous quarter and last year, showing stable credit conditions.
The technology platform was the weakest part of the business, with net revenue dropping 23% to $84.5 million. SoFi said this was because a major client left late last year, which is still affecting results.
Before Wednesday, SoFi shares had fallen 36% this year, much more than the overall market. The stock has struggled because of its high valuation and weakness in the fintech sector. In March, short seller Muddy Waters Research released a report accusing SoFi of accounting problems. SoFi said the claims were not true, but the stock kept falling in the weeks after, including a big drop after its first-quarter earnings, even though key numbers mostly met or beat expectations.
