In FY 2021, SoFi originated $4.3B in student loans (34% origination share). Student loans are big business for SoFi: The fintech originated close to $1.0B in student loans in the last quarter which calculates to a 30% origination share. In May, SoFi slightly increased its outlook for FY 2022 to $1.50-1.51B for net revenues and $100-105M for adjusted EBITDA. In April, SoFi cut net revenue guidance for the current year from $1.57B to $1.47B and adjusted EBITDA guidance from $180M to $100M. The second problem for SoFi, again from an investor point of view, was that the unexpected extension of the Federal Student Loan Payment Moratorium resulted in SoFi lowering its guidance for FY 2022. SoFi ended the last quarter with 3.87M customers in its ecosystem and although member growth is slowing, SoFi could add approximately a million new accounts to its platform by the end of the year. However, in relative numbers, SoFi’s growth has started to moderate and the market has grown more cautious in 2022 because of it: The fintech saw its member base grow 70% in Q1’22, which was the slowest growth rate in two years. It was the third-largest quarterly increase in new members in SoFi’s history. SoFi, in absolute numbers, had a great first quarter in which the company on-boarded 408 thousand new members.
The first problem is that SoFi’s post-pandemic growth is decelerating, which has raised valuation concerns.
SoFi’s problems, from the market’s point of view, are two-fold. SoFi represented deep value for me during the last down-leg because it seemed to me that SoFi was unfairly punished for the extension of the Federal Student Loan Payment Moratorium in April. Shares of SoFi dropped to an all-time low of $4.82 in May. I believe investors should pay attention to these smart money flows! SoFi has some short-term problems Taking advantage of the decline, SoFi’s CEO has purchased shares of SoFi throughout the correction period, with purchases accelerating in May. SoFi is not the only fintech that is looking at steep losses this year, however: PayPal’s ( PYPL ) shares are down 55% year to date and Upstart ( UPST ) has seen a 67% valuation decline. Shares of SoFi are down 52% in 2022 as investors became more wary of the fintech sector due to deteriorating growth prospects in a post-pandemic world. The first five months of the year have been tough ones for SoFi ( NASDAQ: SOFI) and other fintech companies.
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