There’s seemingly good news, but really more bad news, when it comes to neo-banking firm SoFi Technologies (NASDAQ:SOFI) stock.
It’s true that SOFI stock popped after the company released its second-quarter 2022 earnings data. Yet, this might have been an over-enthusiastic response to less-than-ideal quarterly results. Besides, SoftBank (OTCMKTS:SFTBY) is selling some or all of its stake in SoFi, and the company seems too reliant on its personal loan business.
If chasing after stocks that just popped is a disease, then self-education is the cure. Sure, it’s tempting to jump on the SoFi bull bandwagon when the share price just moved higher. Yet, it’s essential to conduct your own due diligence before hitting that “buy” button.
Indeed, a deeper dive into SoFi’s financials will reveal imperfections that the company probably wouldn’t want to advertise. Besides, a financial giant is reducing or even eliminating its stake in SoFi, and that’s certainly not a positive sign.
| SOFI | SoFi Technologies | $7.58 |
What’s Happening with SOFI Stock?
After SoFi released its Q2 2022 fiscal results, a buying frenzy ensued and SOFI stock catapulted higher by around 28.4%. Perhaps traders were enthused about the company’s expectation-beating revenue and forward guidance.
Granted, SoFi’s $356 million in second-quarter adjusted net revenue exceeded management’s guidance of $330 million to $340 million, but in hindsight, that looks like a lowball guidance range.
Furthermore, SoFi raised its full-year 2022 revenue guidance from a range between $1.505 billion and $1.51 billion, to between $1.508 billion and $1.513 billion. That’s an increase of around 0.2%, which really isn’t anything to write home about.
Moreover, SoFi remains an unprofitable business. In Q2 2022, the company recorded a net earnings loss of around $95.8 million. Even the staunch bulls should admit, that’s a deep financial hole to dig out of.
SoftBank Cuts Its Sake in SoFi
On the topic of SoFi’s financials, Mizuho analyst Dan Dolev suggested that the fintech company’s business is lopsided.
Presumably, Dolev’s referring to the U.S. government’s moratorium on student loan payments. Unless the White House extends this moratorium, it’s set to end on Sept. 1, which is approaching quickly.
However, SoFi CFO Chris Lapointe expects that “the federal student-loan payment moratorium will last until January 2023.” So, Dolev’s point about SoFi relying too much on personal loans instead of student loans could have merit.
On top of all that, Japanese financial conglomerate SoftBank is divesting at least part of its 9% stake in SoFi Technologies.
According to a filing with the U.S. Securities and Exchange Commission or SEC, SoftBank sold approximately 5.4 million SoFi shares, followed by an additional 6.7 million shares.
That’s a massive share sale. If SoftBank truly believed in SoFi as a business venture, would it have sold so many shares? It’s a question that the overenthusiastic bulls should ponder before they consider adding to their SOFI stock positions.
What You Can Do Now
A closer look at SoFi’s financial stats reveals that the company is still unprofitable and didn’t raise its revenue guidance by much. Therefore, it’s wise to think carefully before making an investment in SoFi now.
Traders should also consider that Dolev’s worried that SoFi is leaning too much on its personal loan business. Plus, they ought to wonder why SoftBank divested so many SOFI stock shares. Thus, it makes sense to simply refrain from starting or adding to a share position in SoFi Technologies.
On the date of publication, David Moadel did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.