On November 10, SoFi Technologies reported above-consensus third quarter earnings. Solid financial results came alongside an increase in the company’s member base, pushing SOFI as high as $24 per share in post-earnings action.
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1. Fast-growing and profitable
SoFi reported EPS that topped consensus by a penny and revenue that beat by $21.5 million. Third quarter was marked by the fifth consecutive time that SoFi delivered positive EBITDA, something that is not all that common among companies that have been publicly traded for only a few months.
As far as business highlights, YOY member growth of 96% stood out, as did the addition of 377,000 new members — the second-highest quarterly increase in the company’s history. The eye-catching numbers were partially driven by the doubling of SoFi’s products offered.
SoFi’s CEO Anthony Noto seemed satisfied with the company’s performance:
“I believe we’ve accomplished more at SoFi across our uniquely diversified platform of mobile-first financial services products over the past year than many other companies will achieve in a lifetime,”
Regarding guidance, the management team expects growth acceleration in Q4 with revenues up between 49% and 55% and EBITDA of $2 million to $5 million. This was yet another data point supporting the growth story that SOFI bulls had probably been looking for.
2. Galileo growth potential
Galileo is a global payment processing platform that SoFi acquired in a $1.2 billion deal. Since Q1 of 2019, Galileo accounts have been growing sharply at a pace of 80% in Q3, and have recently reached 89 million accounts.
Through Galileo, SoFi is betting on future expansion in Latin America and Mexico, markets in which fintech platforms are still in their early stages.
3. Bank charter approval
One of the most talked-about catalyst of late, an eventual bank charter approval should allow SoFi to accept client deposits as traditional banks do. In September, SoFi announced the agreement to acquire Golden Pacific Bancorp, which is a key strategic step in that direction. According to the CEO:
“We believe that by pursuing a national bank charter, we will be able to help even more people get their money right with enhanced value and more products and services.”
Regulatory approval could provide SoFi with a number of benefits. Among them are (1) the ability to expand lending, (2) lower cost of capital, (3) less reliance on other financial institutions, (4) better loan margins by being able to hold loans longer, among others.
The bank charter speculations also had an unintended consequence that could continue to be beneficial for the stock: the ticker saw its popularity rise on Reddit’s main discussion forums. Retail investors’ positive sentiment may also serve as fuel to push share price even higher from here.
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(Disclaimers: this is not investment advice. The author may be long one or more stocks mentioned in this report. Also, the article may contain affiliate links. These partnerships do not influence editorial content. Thanks for supporting Wall Street Memes)