SoFi Technologies (NASDAQ:SOFI) stock got off to a solid start on Monday, although shares have dipped slightly this afternoon. The company is poised to deliver earnings results for the third quarter, with investor optimism brewing. Fundamentally, segments of the broader financial services industry have been delivering surprisingly robust performances. However, SOFI stock generally remains a challenged investment.
According to Zacks Equity Research, SoFi should beat the consensus earnings estimate for Q3, which calls for a loss of 10 cents per share. Reaching this level would represent a year-over-year (YOY) change of -100%, according to the research firm. Analysts also anticipate revenue to come in at $391.84 million, a gain of more than 41% YOY.
Notably, Zacks mentions that the consensus EPS estimate for SOFI stock has “remained unchanged over the last 30 days.” Zacks also reported that, heading into the session last Friday, shares had “gained 10.54% over the past month, outpacing the Business Services sector’s gain of 4.41% and the S&P 500’s gain of 4.56% in that time.”
Outside fundamental catalysts may bolster SOFI stock as well. As InvestorPlace’s Eddie Pan reports, the company “received a major boost” when President Joe Biden and his administration said the federal student loan moratorium would end on Dec. 31. Pan also notes that Bank of America analyst Mihir Bhatia believes resumed payments “should create a ‘meaningful catalyst path’ for SoFi.” Bhatia has a $9 price target for SOFI stock.
SOFI Stock Presents Challenges
Although this analyst support should encourage investors in SOFI stock, the effects of the aforementioned payments will not be seen in the upcoming earnings, as Pan warns. As a result, investors may want to take a cautionary approach with SoFi Technologies.
To be fair, the financial services sector has posted some surprising quarterly results lately. For instance, American Express (NYSE:AXP) beat expectations for the top and bottom lines. However, many investors read between the lines, causing AXP stock to go volatile on the disclosure. Specifically, observers soured on the company’s expanded provisions for bad loans, which suggested that even more well-off consumers may be feeling the economic heat.
In the same vein, SOFI stock may pop initially based on positive Q3 figures. But it’s vital for investors to consider the longer-term picture. For instance, although SoFi enjoys a “moderate buy” consensus rating on TipRanks, data from Gurufocus suggests a troubled road ahead. The company ranks poorly on the site for revenue and profitability trends. Gurufocus also warns that SoFi displays financial weakness. The firm carries a higher cash-to-debt ratio than more than 59% of the credit services industry.
On a year-to-date (YTD) basis, SOFI stock is down nearly 66%, reflecting broader obstacles.
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On the date of publication, Josh Enomoto 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.