Is SoFi Stock a Buy Ahead of Earnings? Morgan Stanley Weighs In

2021 is already firmly in the past, but on Wall Street, the year won’t be truly over until companies report 4Q21’s financials. That said, when SoFi Technologies (SOFI) steps up to the earnings plate next month, Morgan Stanley’s Betsy Graseck believes all eyes will be on the outlook for 2022.

After showing ~60% top-line growth in 2021, Graseck believes the bears are “skeptical of strong revenue growth continuing, looking for a sharper slowdown in 2022.”

Graseck is no SOFI bear, but also anticipates growth will slow down, expecting around 40% growth in 2022e, with adjusted 2022e revenues hitting ~$1.42 billion. The analyst sees 2022e EBITDA reaching $164 million as EBITDA margins expand to 11.5% from 3.0% in 2021e.

The “forthcoming boost” for student loan refi originations will get another 3-month delay due to President Biden’s extension of the federal student loan moratorium to May 1. To account for the delay, Graseck had already reduced her student loan refi forecast, and now predicts $5.1 billion of SLR originations in FY22. Graseck’s outlook presumes a return to a pre-COVID run-rate of $2 billion a quarter does not occur before early 2023.

Elsewhere, since SOFI last reported earnings in November, interest rate expectations have “risen,” which Graseck says puts a dampener on gain on sale margins from here on in.

Lastly, over each of the past 3 quarters, SOFI has managed to double its total member base on a year-over-year basis, which along with product growth, Graseck believes is an “important leading indicator for the forward revenue growth trajectory.” For the quarter, the analyst expects 10% sequential growth and a 74% uptick from the same period last year, with members reaching 3.2 million. Member engagement should also “continue to increase,” with products per member growing from 1.45x to 1.49x, exhibiting year-over-year total products growth of 90% and landing at 4.8 million.

To this end, Graseck reiterated an Overweight (i.e., Buy) rating for SOFI, although the shares get a new price target as the figure drops from $22 to $20….

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