SoFi Technologies Stock Before Q1 Earnings: To Buy or Not to Buy?

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

The Zacks Consensus Estimate for earnings in the to-be-reported quarter stands at 3 cents, indicating 50% growth from the year-ago reported quarter. The consensus estimate for revenues stands at $742.3 million, implying 27.9% year-over-year growth.

There has been one upward revision in earnings estimates in the past 60 days against one downward revision.

SOFI May Not Deliver Q1 Earnings Beat

Our proven model does not conclusively predict an earnings beat for SOFI this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy), or 3 (Hold) increases the odds of an earnings beat. But that’s not the case here. You can uncover the best stocks before they're reported with our Earnings ESP Filter.

SOFI has an Earnings ESP of -5.33% and a Zacks Rank of 3. (Find the latest EPS estimates and surprises on Zacks Earnings Calendar.)

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

SOFI May Deliver Strong Segmental Growth

We expect a significant year-over-year improvement in the company’s top line in the to-be-reported quarter, driven by healthy business from the Financial Services, Lending, and Technology Platforms segments.

The consensus estimate for Financial Services revenues is pegged at $293.7 million, indicating 95% year-over-year growth. The consensus mark for Lending revenues is pegged at $372.2 million, indicating 12.6% year-over-year growth. The Technology Platform segment is expected to grow 3%.

SOFI Stock Not in a Good Mood

The company’s shares have declined 20% this year compared with a 15% decline in its industry and an 8.5% fall in the Zacks S&P 500 composite.

Currently, the stock appears to be overvalued. The forward 12-month Price/Earnings ratio stands at 37.79X forward earnings, which is way higher than the industry’s average of 15.4X. It is trading above its 50-day moving average.

Investment Considerations

The demand for online financial platforms is expected to rise, and SOFI's technology platform, Galileo, is integral to its banking business and is being adopted by other financial firms. This expansion positions SOFI to capture more market share from traditional banks. While conventional banks JPMorgan JPM, Bank of America BAC and Wells Fargo WFC are also building their digital platforms, the acceleration in Galileo adoption positions SOFI to become a major player. 

By enabling seamless payment and lending integrations, Galileo positions SoFi as a leading player in the embedded finance market. This sector is projected to witness a robust 16.8% CAGR through 2029, fueled by increasing demand for integrated financial solutions. Galileo's ability to attract high-profile clients and diversify SoFi’s revenue streams strengthens the company's long-term outlook. The platform’s adoption by other financial firms further solidifies SoFi’s market position and enhances its ability to capture additional market share.

Wait for a Better Entry Point

SoFi Technologies’ mixed outlook warrants a hold recommendation. While the company is positioned for growth across its core segments, driven by financial services, lending, and its technology platform, near-term risks loom. The combination of a negative Earnings ESP and a Zacks Hold rating implies earnings may fall short of estimates, even as revenue trends upward. The stock’s recent underperformance relative to broader markets and peers, paired with premium valuation levels, suggests overoptimism is priced in. Though its Galileo platform offers long-term potential in embedded finance, execution risks and competition from established banks persist. Existing investors should hold, but new buyers are better off waiting for post-earnings clarity or a pullback to mitigate downside risk.

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This article originally published on Zacks Investment Research (zacks.com).

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