SoFi’s Earnings Are All About Student Loans

The stock has gained around 69% since reporting first-quarter earnings on May 1. Part of that was solid earnings. For the first quarter, SoFi posted a narrower-than-expected loss of 5 cents a share on revenue of $460.2 million. Personal loan originations climbed 46% from the year-ago quarter, while student loan volume took a plunge, and members and products both rose. 

And part of those gains came from headlines about student-loan forgiveness. Shares have doubled this year as Congress moved to resume repayments in the fall and the Supreme Court blocked President Biden’s forgiveness plan. 

Analysts are mixed on SoFi stock, with 32% rating it Buy, 58% Neutral, and 11% Sell, according to FactSet. J.P. Morgan analyst Reginald Smith, who rates shares Neutral with a price target of $6, expects strong second-quarter numbers for member and deposit growth but says climbing Treasury yields could weigh on profit growth and threaten guidance. He said he is worried, though, that expectations for refinancing student loans as payments restart are too high.

“SOFI shares have rallied in recent weeks on enthusiasm around the student loan refinance opportunity, which we continue to believe is smaller than many investors appreciate,” Smith wrote in a Friday report. 

Last month, J.P. Morgan analysts led by Smith wrote that company management values the multiyear addressable refinance opportunity at around $200 billion, while the analysts expect less than half of that, closer to $90 billion. 

Earlier this month, SoFi Chief Executive Officer Anthony Noto also weighed in on that opportunity. “We think there will be ample amount of demand for people who are trying to lower their costs on a monthly basis in this environment and then more broadly, you know, some subset of the people being able to actually reduce their total cost of their loans,” he told Barron’s.

SoFi was founded in 2011 and taken public on June 1, 2021, via special purpose acquisition company Social Capital. Shares opened at $21.97 and closed at $22.65 that day, according to Dow Jones Market Data. Since then, and despite this year’s rally, the stock has declined sharply, ending Friday at $9.55.

The company began as a lender focused on refinancing student debt, and its acquisition of Technisys SA last year helped turn it into a full-service bank.

SoFi is a volatile stock, so expect a roller-coaster ride when earnings land.

Write to Emily Dattilo at emily.dattilo@dowjones.com