Key Points
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SoFi’s adjusted net revenue grew 44% last quarter, and management raised its full-year guidance.
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The stock has given back its entire post-earnings gain in the recent market sell-off and sits about 50% below its high.
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At about 2 times tangible book value, SoFi looks like a bargain for patient investors.
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SoFi Technologies (NASDAQ:SOFI) stock jumped last week after the company reported a strong third quarter. Now, thanks to the recent stock market sell-off, that gain is gone. SoFi closed at just over $16 on Nov. 5, about 50% below its record close from a year ago.
The interesting thing is that nothing about the business explains that drop. Here’s why I’d buy the dip.
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A quarter worth celebrating
SoFi’s adjusted net revenue grew 44% year over year to $1.37 billion. Its member count grew 35% from a year ago to 17.1 million, and the company’s additions were the highest ever in a single quarter. Fee-based revenue, which is capital-light and high-margin compared with interest income, grew about 40% to $571 million.
SoFi’s profits are growing, too. Net income was a record $241 million; adjusted EBITDA was $470 million, at a 34% margin. Management also raised its full-year outlook, now expecting about $5.04 billion in adjusted net revenue, implying 40% growth, up from its prior forecast of $4.75 billion to $4.85 billion. SoFi’s leaders also raised their adjusted EBITDA forecast to about $1.66 billion and still expect its member count to grow at least 30% this year. The newly announced 2027 outlook was extremely strong as well. This is a company firing on all cylinders.
Why the stock is cheap
To be sure, the market loved SoFi’s earnings, as evidenced by the stock’s sharp upward move after the release. But the reason SoFi gave up the gain appears to be mainly due to overall market weakness. Specifically, SoFi fell nearly 8% on Nov. 5 as financial stocks and Bitcoin sold off alongside the broader market. At about $16, SoFi trades for roughly 2 times its tangible book value of $7.48 per share. That’s not exactly cheap compared with the price-to-tangible book of the established and slow-growing mega-banks, but it’s certainly a reasonable price for a bank that’s growing revenue at 40%-plus.
Let’s be clear. Nothing in SoFi’s business has changed between its earnings report and the recent sell-off. There have been no company-specific news releases or reasons to think anything within the business has weakened so far in the fourth quarter. It simply fell alongside other fintech stocks. For example, Robinhood (NASDAQ:HOOD) and Affirm (NASDAQ:AFRM) are both in the red over the past month.
To be sure, SoFi isn’t exactly a cheap stock. It trades for about 26 times management’s 2026 earnings forecast of $0.61 per share. The stock is also volatile. Not only did it soar by a double-digit percentage after its third-quarter earnings, but it fell more than 15% in a single day in April when management held its guidance steady. And as a lender, SoFi would most likely feel it if the economy weakens.
The bottom line
Having said all that, SoFi is the largest financial-sector investment in my portfolio, and it’s important for investors to realize that a 50% decline doesn’t necessarily mean the business is 50% less valuable. I’ll certainly be watching credit quality and whether fee-based revenue continues to grow faster than the rest of the business. But at these levels, I’m more likely to add to my position than sell.
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Matt Frankel, CFP® has positions in SoFi Technologies. The Motley Fool recommends Robinhood Markets. The Motley Fool has a disclosure policy.
