MoffettNathanson analyst Eugene Simuni initiated coverage of SoFi Technologies (NASDAQ:SOFI) on April 6. The analyst has a Buy rating on SOFI stock with a target price of $13. However, it was bad timing by the analyst.
The company issued updated guidance today to reflect the latest extension to the moratorium on federal student loan payments until Aug. 31 from the previous May 1 deadline. The company’s new guidance assumes that the suspension will not end in 2022. Despite the bad news, SOFI stock remains a good buy for aggressive investors. I believe the analyst will be vindicated for his ill-timed initiation coverage of the fintech disruptor.
What’s changed about its guidance?
The company’s adjusted net revenue in 2022 has been lowered by $100 million to $1.47 billion. As a result, its adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) are $80 million lower than its previous guidance. In percentage terms, that’s a 6.4% reduction in revenue and a 44.4% reduction in EBITDA.
CEO Anthony Noto explained in its press release why the company is not worried about the future of its business:
Even with the assumption of no end to the moratorium in 2022, our new full year 2022 financial guidance represents approximately 45% year-over-year Adjusted Net Revenue growth to $1.47 billion, a tripling of Adjusted EBITDA to $100 million, and a doubling of margins.
I completely agree with the analyst’s position that the company’s trifecta of revenue streams: Lending (75% of revenue), Fintech Infrastructure (20%), and Digital Banking (5%), each possess a “distinct set of risks and opportunities.” While the lending arm continues to do business as if it has one arm tied behind its back, the other two units have an opportunity to become bigger contributors to overall revenues in the months ahead.
If you’re an aggressive investor, SoFi’s updated guidance gave you a 10% off card to buy SOFI stock. So, despite the doom and gloom, this is a buying opportunity.
On the date of publication, Will Ashworth did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
