Why SoFi Technologies Stock Plunged 12.5% ​​After Earnings

SoFi Technologies (NASDAQ:SOFI) The stock fell 12.5% ​​as of 9:45 a.m. ET Tuesday, despite beating on sales and profit in its earnings report this morning.

As for earnings, analysts forecast that the online bank would post earnings of $0.04 per share on $632.3 million. In fact, SoFi reported earnings of $0.05 per share and revenue beat expectations at $697.1 million.

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SoFi continued to post impressive growth in the third quarter, with membership increasing 35% year-over-year to 9.4 million, although revenue grew more slowly at 30%. CEO Anthony Noto called the company's growth trends “enduring” and noted that the third quarter was “the strongest quarter in our history.”

SoFi also noted an improvement in credit quality. Personal loan charge-offs fell 32 basis points to 3.52%, and personal loan delinquencies fell 7 basis points to 0.57%. Both metrics are likely to tend to increase the company's profits. In fact, net interest income increased by 25%.

The company saw the greatest growth in the financial services and tech platform segment, where revenue increased 64% year-over-year. This segment now accounts for nearly half – 49% – of SoFi's business. And it's apparently a very high-margin business for SoFi. Instead of posting a loss of $0.29 per share like it did in the third quarter a year ago, SoFi this time posted a profit of $0.05 per share, its fourth straight quarterly net income.

However, four quarters of positive earnings still make SoFi stock look quite expensive. In total, the company collected $0.12 per share last year. But based on a stock price of almost exactly $10 per share, that works out to a P/E ratio of 83.

Is that a fair price?

Management expects revenue to increase 22% or 23% in 2024, with membership increasing 30%. Profit will be in line with the last 12 months' figure of $0.12 per share – but analysts expect earnings to more than double to $0.25 per share next year. As strange as it may sound, paying 83 times earnings for a growth rate of over 100% could actually make SoFi a cheap stock.

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