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The Zacks Consensus Estimate for earnings in the to-be-reported quarter stands at a breakeven against a loss of $6 cents per share incurred in the year-ago quarter. The consensus mark for revenues is pegged at $563.6 million, indicating year-over-year growth of 15.3%.
Three estimates for the to-be-reported quarter moved south over the past 30 days versus one northward revision. Over the same period, the Zacks Consensus Estimate for the quarter’s earnings has decreased by a penny.
< Image Source: Zacks Investment Research
What Our Model Says
Our proven model doesn’t conclusively predict an earnings beat for SOFI this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat. But that’s not the case here. You can uncover the best stocks to buy or sell before they're reported with our Earnings ESP Filter.
We expect strength in the Financial Services and Technology Platform segments to have driven the company's top line in the second quarter. We expect SoFi’s cost-saving efforts to have contributed to the contraction of losses in the quarter. We are expecting robust members and product growth in the quarter.
Stock Looking Pricey
SOFI’s stock has witnessed a notable surge of 15% in the past month. This rise is significant when compared to the 0.6% return of its industry and the 0.7% fall in the Zacks S&P 500 composite.
One-Month Price Performance
Image Source: Zacks Investment Research
Currently, the stock appears to be overvalued. The forward 12-month Price/Earnings ratio stands at 41.77X forward earnings, which is higher than the industry’s average of 36.2X.
< Image Source: Zacks Investment Research
Investment Considerations
The continuous digitalization across all industries, particularly in the financial sector, presents a significant opportunity for SOFI, which focuses on online banking and offers a comprehensive suite of products and services. Additionally, a potential reduction in federal fund rates by 2025 due to slowing inflation will likely lead to increased credit activity and lower depositor charges, particularly benefiting SOFI’s lending segment.
The demand for online financial platforms is expected to rise, and SOFI's technology platform, Galileo, is not only integral to its banking business but is also being adopted by other financial firms. This expansion positions SOFI to capture more market share from traditional banks. Conventional banking giants like JPMorgan (JPM - Free Report) , Bank of America (BAC - Free Report) , and Wells Fargo (WFC - Free Report) are more mature and are experiencing slower growth.
Recently, SOFI’s stock enjoyed a seven-day winning streak following the announcement from Galileo regarding new wire transfer capabilities for fintech firms. However, this upward momentum was disrupted when the Biden administration decided to forgive $1.2 billion in student loans for 35,000 public service workers under the Public Service Loan Forgiveness program. This decision poses a potential challenge to SOFI's lending business moving forward.
Wait for a Better Entry Point
Given the current valuation and market conditions, investors may exercise caution before buying SOFI shares. While the stock’s recent performance and growth prospects appear promising, the high valuation and potential risks, such as the impact of student loan forgiveness, suggest that waiting for a more favorable entry point could be a prudent strategy rather than rushing to buy the stock before earnings.
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SOFI Stock Before Q2 Earnings: Should You Buy, Sell or Hold?
SoFi Technologies, Inc. (SOFI - Free Report) will report its second-quarter 2024 results on Jul 30, before the bell.
The Zacks Consensus Estimate for earnings in the to-be-reported quarter stands at a breakeven against a loss of $6 cents per share incurred in the year-ago quarter. The consensus mark for revenues is pegged at $563.6 million, indicating year-over-year growth of 15.3%.
Three estimates for the to-be-reported quarter moved south over the past 30 days versus one northward revision. Over the same period, the Zacks Consensus Estimate for the quarter’s earnings has decreased by a penny.
What Our Model Says
Our proven model doesn’t conclusively predict an earnings beat for SOFI this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat. But that’s not the case here. You can uncover the best stocks to buy or sell before they're reported with our Earnings ESP Filter.
SOFI has an Earnings ESP of -41.67% and a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank stocks here.
Factors Shaping Upcoming Results
We expect strength in the Financial Services and Technology Platform segments to have driven the company's top line in the second quarter. We expect SoFi’s cost-saving efforts to have contributed to the contraction of losses in the quarter. We are expecting robust members and product growth in the quarter.
Stock Looking Pricey
SOFI’s stock has witnessed a notable surge of 15% in the past month. This rise is significant when compared to the 0.6% return of its industry and the 0.7% fall in the Zacks S&P 500 composite.
One-Month Price Performance
Currently, the stock appears to be overvalued. The forward 12-month Price/Earnings ratio stands at 41.77X forward earnings, which is higher than the industry’s average of 36.2X.
Investment Considerations
The continuous digitalization across all industries, particularly in the financial sector, presents a significant opportunity for SOFI, which focuses on online banking and offers a comprehensive suite of products and services. Additionally, a potential reduction in federal fund rates by 2025 due to slowing inflation will likely lead to increased credit activity and lower depositor charges, particularly benefiting SOFI’s lending segment.
The demand for online financial platforms is expected to rise, and SOFI's technology platform, Galileo, is not only integral to its banking business but is also being adopted by other financial firms. This expansion positions SOFI to capture more market share from traditional banks. Conventional banking giants like JPMorgan (JPM - Free Report) , Bank of America (BAC - Free Report) , and Wells Fargo (WFC - Free Report) are more mature and are experiencing slower growth.
Recently, SOFI’s stock enjoyed a seven-day winning streak following the announcement from Galileo regarding new wire transfer capabilities for fintech firms. However, this upward momentum was disrupted when the Biden administration decided to forgive $1.2 billion in student loans for 35,000 public service workers under the Public Service Loan Forgiveness program. This decision poses a potential challenge to SOFI's lending business moving forward.
Wait for a Better Entry Point
Given the current valuation and market conditions, investors may exercise caution before buying SOFI shares. While the stock’s recent performance and growth prospects appear promising, the high valuation and potential risks, such as the impact of student loan forgiveness, suggest that waiting for a more favorable entry point could be a prudent strategy rather than rushing to buy the stock before earnings.