Shares of red-hot fintech SoFi Technologies (NASDAQ: SOFI), which more than doubled in 2023, are stumbling out of the gate in 2024. After sliding 3% on Jan. 2, the first trading day of the New Year, SoFi fell further Wednesday morning, with the stock losing an additional 13.5% through 11:35 a.m. ET.
I blame investment bank Keefe, Bruyette & Woods for that.
Easy come, easy go
From a share price below $5 at the start of last year, SoFi stock raced past $10 a share in the closing days of 2023. But investors may have become just a wee bit irrationally exuberant about this unprofitable fintech, as Keefe, Bruyette & Woods pointed out in a downgrade covered on StreetInsider.com this morning.
On the one hand, admits the analyst, it’s “possible” that when SoFi next reports earnings, it will turn out that SoFi made its first-ever profit (despite never having been profitable before). But this is a question that “remain[s] heavily debated” among analysts. And in KBW’s view, at least, “There are more downside scenarios to this outcome than upside.” Even if SoFi does earn a profit in Q4, it may be one that the internet bank is unable to sustain.
More likely, in KBW’s view, is that SoFi will generate only $2.3 billion in revenue this coming year (10% below consensus forecasts), and that its earnings before interest, taxes, depreciation, and amortization (EBITDA) will be about $493 million, which is 17% below estimates — in which case everything after the “B” could still force SoFi into a loss on the bottom line.
2024…and 2025
If KBW’s calculations are correct, SoFi’s EBITDA will be about $80 million less than what other investors are expecting SoFi to report this year, which — according to forecasts collated by S&P Global Market Intelligence — would be a big enough miss to guarantee a net loss in 2024.
The good news, though, is that SoFi can still get very close to profitability this year even if Keefe, Bruyette & Woods is right. And if that’s the case, it becomes even more likely that SoFi will report positive profits in 2025. The question then becomes whether 2025 forecasts…
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