Could SoFi Stock Be a Generational Buying Opportunity Right Now? | SOFI Stock Earnings Review Part 6

Ajouté : 2026-05-06

[00:00:00]In my sixth and final part of my deep dive into SoFi stock and its latest quarterly report, we're going to start with looking at its smaller loan segments including student loans and home loans and we'll expand into why the management team decided to sell a big portion of the business to raise over a billion dollars in capital and finally I'll evaluate and provide an overview and summary of my takeaway from this quarterly financial update. The deep dive, what are my big picture takeaways? What's my buy, hold, or sell rating? What's my fair value calculation? And why is SoFi stock crashing after this report? I'll provide that overview and summary after evaluating the final elements of the company's quarterly financial result. I want to thank The Motley Fool for sponsoring this video. Visit fool.com/parkev for the 10 best stocks to buy now.

[00:00:57]So one of the benefits and one of the upsides from the latest quarterly update was SoFi's student loan and home loan business. Student loan originations jumped to 2.6 billion and that was up by more than 2.2 x year-over-year. Remember this segment struggled as the Biden administration paused student loan payments and tried to forgive a significant amount of student loan balances and the Trump administration has reversed many of those and is insisting on individuals that owe money after borrowing for going to college that they pay back that money and that's been a good news for SoFi and its student loan portfolio is increasing as a result. Additionally, home loans are doing really well and this is an opportunity that has a lot more upside for SoFi than student loans and personal loans because it's a much bigger category. Every customer that signs up for a home loan, that balance is much larger, several hundred thousand dollars at the least when you're purchasing a home compared with student loans and personal loans, those loans are much smaller in relation to home loans.

[00:02:13]Furthermore, home loans come with the collateral, that big collateral, the home, which is a big factor in lowering risk when you make that loan because if the borrower defaults, you can foreclose on the home and then sell the home and recoup your lost funds. So it was good to see that this was the fastest growing segment in their loan portfolio. It was up 2.4 x from the same time last year.

[00:02:39]It's still the smallest part at 1.2 billion, but if it keeps growing at this rate, it's only a matter of time before it consists of a larger percentage of its overall loan portfolio. So now let's talk about the capital raise, the stock sale, which is usually a negative in the near term because you're adding new shares and that's decreasing the earnings per share because if your profits are remaining constant, but there are more shares outstanding, then the price per share or I should say the earnings per share decreases. And the CEO elaborated a little bit on this saying that the capital raises were opportunistic with proceeds intended to be deployed across a range of opportunities.

[00:03:23]And I I'm a little bit curious as to how investors should take this. On the one hand, it's a bit of a down it's a bit of a downer because if the company's going to opportunistically sell stock, does that mean that when the price increases, that they're going to take advantage of that and sell stock, which puts a bit of a ceiling on the share price, right? If investors if the management team goes into a habit of selling stock when the price increases, then investors won't be as enthusiastic about the company's upside because they'll feel like every time the share price jumps, the management team is going to capitalize and sell stock. And so that's not something that I don't that investors were happy with.

[00:04:11]You know, but it was something from a business perspective, I would agree with, right? When you know, I started talking about when SoFi stock price surpassed 25 and approached $30 per share, I was talking about and warning investors and saying that the stock is too expensive. It's gotten ahead of itself. You know, I had been recommending SoFi stock for most of last year, but after the share price was up over 80%, I started warning investors that this was too much too quick, that the fundamentals of the business haven't caught up with the share price increase.

[00:04:48]And so for the management team to realize that and say, "Hey, look, we have an overvalued stock. We can take advantage of that while the price is high, sell the stock, get the cash to invest in the business to improve the fundamental prospects of the business in the long term." So in that in in that view, it made all the sense in the world, but in the view from an investor perspective and investors are investing in SoFi stock mostly because of the upside. It has great long-term upside potential, but if you're fearful of the management team always selling stock if the price goes up too quick, too fast, that lowers some of that upside potential. So that's just something to keep in mind here as it relates to stock sales.

[00:05:33]So another key consideration from the company's latest results was that the loan platform segment was less important than in previous quarters. SoFi decided to make more loans and place them on their own balance sheet rather than make the loans for third-party lenders and that raised some concerns from investors who started asking, "Does this mean that demand from those loan platform partners decreased?" And the management team from SoFi said, "No, it didn't. In fact, during the quarter," they said they added 3.6 billion dollars of new commitments with three new partners including a leading global bank and insurance group and and a top five global private asset management firm. So these are new partners, but they didn't answer the question of existing partners. Did existing partners reduce their commitments to SoFi or did they reduce their appetite for these loans?"

[00:06:35]Management said, "No," but the results showed otherwise.

[00:06:39]So this was something that management didn't convince investors about and investors remained concerned. It's one of the reasons why the stock price is down 14% as of this recording after they reported these results. And they talk about the pros and cons, right? The loan platform business generates capital light fee income with no retained credit risk or loss share agreements. So it's just high margin, low risk, capital light revenue that investors really appreciate from SoFi. So the fact that this segment was less prominent in the recently completed quarter was downside to be sure. So they elaborated on their thinking here. They said, "Given their strong capital ratios, they channeled nearly 5.4 billion dollars of personal loans to their own balance sheet and only 3 billion to their loan platform business." In other words, what they were saying is they had a lot more money on hand and they wanted to use that money. They wanted to use that capital and they chose to use that capital to make loans. Whereas investors would have preferred SoFi use that capital for something else, invest in other categories and make more loans for the loan platform business.

[00:07:53]But the management team said that this was on purpose. It resulted in lower LPB loan platform originations relative to the previous quarter, although overall year-over-year, that was still up 90%.

[00:08:07]They said, "You know, we had significant demand from their partners over and above what they decided to fulfill in the quarter." So in other words, they could have done more in LPB business if they chose to, but instead they chose to make more of these loans for themselves and keep it on the balance sheet.

[00:08:25]Investors were not happy with this decision and management didn't do a good job of convincing investors that it's in the long-term benefit of shareholders to make this decision. So what's my overall takeaway from SoFi in the current quarter? Well, revenue growth is accelerating and they added a record amount of new members. The longer-term structural tailwind remains in place.

[00:08:50]The company has huge upside. It's trading at a market capitalization of 20 billion and it could become a 500 billion dollar company in the long run, maybe in a decade or more if it fulfills on its ambitious goals to become everything for everyone in terms of financial needs. They want to provide you with every financial product that you could possibly ever need in your lifetime. And so with that ambitious goal, if they hit that target, they could become an absolutely massive company.

[00:09:23]But in the near term, it's making great progress.

[00:09:27]The question mark becomes the risk profile and in the near term, what we saw from the current quarter, the risk increased meaningfully. They made more loans for their personal loan platform business and they made more personal loans. Those are the riskiest types of loans overall.

[00:09:45]And question marks arose about demand from third-party lenders to make those personal loans. And so with those risks rising, that decreases that likelihood that they hit that $500 billion market cap or $300 billion market cap. Whatever that, you know, ceiling is for this company in the long run if it hits its ambitious goals. The probability of hitting those goals decreased by a percentage by by some percentage because of what we saw from third-party and also, something I haven't talked about in this video just yet, another big risk increased because of the decrease in the tech platform business.

[00:10:29]And the need to restructure that business that we saw from the current quarter, that also decreased the probability that the company becomes that huge big ambitious company because that tech platform segment revenue was something that investors were looking for to continue increasing and financial services and tech platform business now consists of less than 50% of its overall revenue. In summary, the risk of the business increased and I reflected that in the beta. So, I lower I I increased the beta, increasing the risk profile, which increased the weighted average cost of capital, which had the impact of lowering the intrinsic value per share.

[00:11:10]Additionally, I had this company's longer-term growth rate pegged at 5% and I lowered that to 4.75% following what I saw from the company in the current quarter uh in the tech platform segment and in the loan platform business. Given those changes, the intrinsic value per share decreased to $15.30, whereas I previously had it at over $18 per share.

[00:11:36]Overall, however, I remain bullish on the company. It has the right product for the current demand from consumers.

[00:11:45]And the upside is absolutely massive.

[00:11:47]So, the risk versus reward remains attractive. So, I reiterated my buy rating on SoFi stock following these quarterly financial results.