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Why SoFi Dipped After Posting Stellar Results

When online bank provider SoFi Technologies (SOFI) posted strong loan origination growth, shares rallied. Bears, who have a 13% short interest on SOFI stock, quickly took back control. Shares ended lower in the last week.

What happened?

Q4 Earnings

SoFi posted a small two-cent profit. Analysts expected the firm to post only break-even results. Revenue soared by 34% Y/Y to $594.25 million. In Q1/2024, management forecasts adjusted net revenue of up to $560 million. Its EBITDA is $110 to $120 million, while GAAP net income is in the range of $10 million to $20 million.

These results suggest that SOFI stock should break out to at least $10.00.

Sell-Off Followed

Buying momentum faded when Morgan Stanley downgraded the bank to Underweight from Equal Weight. The firm cited excess optimism in its profitability strategy. In addition, analyst Jeffrey Adelson warned that markets expected too high a profit outlook for SoFi by 2026.

Readers should recognize that SoFi’s target customer base is similar to that of Morgan Stanley’s. However, the former may target those with a lower net worth. Either way, both firms need to win customers to grow their deposit volume. Interest rates will remain at over 5%, increasing competition among fintech and traditional firms to attract deposits.