Shares of SoFi (NASDAQ:SOFI) closed in the green following the release of three pieces of news related to the company. First, President Joe Biden’s administration has proposed a new student loan repayment plan that could cut costs for many borrowers. CNBC reports the new plan may cut payments by as much as 50% for some borrowers. In addition, the proposal could drop payments for the most affordable income-driven repayment plan to 5% of discretionary monthly income from 10%.
Higher education expert Mark Kantrowitz noted the plan could be enacted by as soon as July 1, although some parts of the plan may be enacted sooner. It could be seen as a positive for SOFI stock, as it could encourage more students to enroll in affordable higher education by taking on student loans.
Next, SoFi disclosed that it would report its full-year and fourth-quarter earnings on Jan. 30. Let’s get into the details.
Why Is SOFI Stock Up Today?
For Q4, analysts are expecting revenue of $426.03 million, up 52.2% year-over-year (YOY) from $279.88 million. Furthermore, earnings per share (EPS) is expected to tally in at a loss of nine cents compared to a loss of 15 cents a year ago.
Those estimates would bring full-year revenue to $1.53 billion and the EPS loss to 43 cents. For 2023, analysts are forecasting revenue of $2.03 billion and an EPS loss of 26 cents.
Finally, Seeking Alpha contributor Christopher Hoeger released an interview with CFO Chris Lapointe and his concluding thoughts following the interview. The main topic of the interview was stock-based compensation (SBC) and how it dilutes existing shareholders. Following the interview, Hoeger concluded the actual dilution from SoFi’s SBC program is “fairly minimal” despite many arguing SBC would dilute SOFI by 25% each year. He also believes SBC will decline as the company grows.
Hoeger does admit SBC is currently a significant expense. During Q3, SoFi reported a net loss of $74.2 million and SBC expense of $77.9 million. That means, all other things held equal, SoFi could have been profitable in Q3 without SBC.
On the other hand, Hoeger believes SBC is driving performance. When employees are rewarded, they are more incentivized to work harder. A hardworking employee culture paired with adequate rewards could ultimately lead to a higher stock price.
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.
