Stock markets are giving no love to SoFi Technologies (NASDAQ:SOFI). The promising financial tech (fintech) firm looks like another special purpose acquisition company (SPAC) dud. Most de-SPACs that were listed on major exchanges faded quickly. SOFI stock is no exception. The company cannot blame its misfortunes on going public. It attracted a legion of investors a year ago during the hot stock markets. SOFI stock is down partly on the Federal Reserve’s abrupt interest rate hiking policy, the end of quantitative easing, the war in Ukraine, and bearish market sentiments. SoFi is equally responsible for its drop. It cut its 2022 guidance nearly one month ago.
Markets now expect the student loan moratorium extension will hurt Sofi’s full-year results. Its first-quarter (Q1) 2022 earnings conference call is scheduled for May 10, 2022, at 5:00 p.m. Investors will not fault SoFi for posting sharply lower earnings before interest, taxes, depreciation, and amortization (EBITDA). At worst, shareholders may wait out the government. Critical analysts will need to dig deeper than that. They need to question Chief Executive Officer (CEO) Anthony Noto’s buying spree. For example, he bought Technisys at inflated valuations. CEO Noto will need to explain how this unit will make profits for SoFi. The market is in an inflationary environment. This will hurt the return potential for the acquisition. Furthermore, SoFi still must justify its Galileo Financial Technology acquisition from two years ago.
SoFi may anger shareholders if customer growth rates slow in the quarter. If it reports any slowdown, it would suggest that SoFi is succumbing to the tougher market conditions. It also implies that the emerging fintech firm is losing to competitors. In the cryptocurrency market, customers may go with Coinbase Global (NASDAQ:COIN). For stock trading, Robinhood (NASDAQ:HOOD) is an alternative. And in banking, Bank of America (NYSE:BAC) and Wells Fargo (NYSE:WFC) may increase promotional activities to lure in new customers.
SoFi’s quarterly report is the next major event to watch. CEO Noto has no room left to disappoint investors. Any lowered guidance would send SOFI stock to newer lows. Conversely, CEO Noto may forecast EBITDA growth accelerating. He may point to Technisys and Galileo as the two solutions driving product sales.
On the date of publication, Chris Lau 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.
