Shares of SoFi (NASDAQ:SOFI) are trading higher by more than 20% after the company reported its second-quarter earnings.
During the quarter, student loans accounted for 12.44% of total loan origination volume, compared with 29.6% during Q1. Total origination volume clocked in at $3.2 billion, with student loan volume at $398.72 million. Still, student loan volume is down 25% compared to the average volume before the coronavirus pandemic. This was impacted by the federal student loan payment moratorium, which is expected to be extended a seventh time.
Meanwhile, personal loan originations reached a record high of nearly $2.5 billion, up 91% year-over-year (YOY). This hefty increase resulted from advances in automation from the application-to-approval process and constant testing of risk controls for accredited borrowers.
“While the political, fiscal, and economic landscapes continue to shift around us, we have maintained strong and consistent momentum in our business,” explained CEO Anthony Noto. “We built our products and services to provide durable growth and profitability, and that is what we are delivering.”
With that in mind, let’s dive into three key reasons why SOFI stock is trading higher today.
SOFI Stock: SoFi Reports Q2 Earnings
For the quarter, adjusted revenue reached a record high of $356 million, up 50% YOY and beating the analyst estimate of $340.8 million. The record high figure was driven by strength in all three of SoFi’s business segments: lending, technology platform and financial services.
In addition, the company is making strides toward profitability. Its GAAP net loss totaled $95.8 million, compared to a loss of $165.3 million a year ago. On top of that, adjusted earnings per share, or EPS, was a loss of 12 cents. Analysts were expecting a loss of 14 cents. Adjusted earnings before interest, taxes, deductions and amortizations (EBITDA), another measure of profitability, reached $20.3 million. The figure was positive for the eighth consecutive quarter.
Finally, SoFi’s bank charter has benefitted the company in a time of macroeconomic uncertainty. Deposits grew by 135% YOY to $2.7 billion, buoyed by a maximum annual percentage yield (APY) increase to 1.8%. Because of this growth, SoFi has “benefited from a lower cost of funding for [its] loans.”
SoFi issued full year adjusted revenue guidance of $1.508 billion to $1.513 billion. Previously, the company had issued guidance of $1.505 billion to $1.51 billion. Furthermore, full-year adjusted EBITDA is expected to be between $104 million and $109 million. The previous EBITDA guidance was between $100 million and $105 million.
On the date of publication, Eddie Pan did not hold (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.
