SoFi Technologies (NASDAQ:SOFI) is less than week away from reporting its latest financial results/updates to guidance. Yet while earnings releases can sometimes led to big post-earnings rallies, concerns are rising that SOFI stock may experience a post-earnings price decline.
Admittedly, there is something that does point to investors bailing on this fintech’s shares once the latest numbers drop pre-market on July 31.
Having said this, if you currently own SOFI, is now the time to cash out? If this stock has been on your watchlist, will a poorly-received earnings report be a warning sign to stay away?
The answer to both questions is no. If shares slide after earnings, the reason for it won’t be due to anything that alters the long-term bull case. This points to existing investors holding onto positions. For new investors, it may even create an opportunity to buy at a can’t miss price.
SOFI Stock Earnings Preview
During the 2022 bear market, SoFi fell out of favor. Since May, however, its shares have swiftly come back into favor. In large part, due to favorable political developments, which solidified an end to the student loan repayment moratorium, initiated at the start of the pandemic.
In theory, this news bodes well for SOFI stock. A resumption of student loan repayments points to one of the company’s now-dormant businesses (its student refinancing unit) springing back to life. That’s not all.
The resurgence of demand for student loan refinancing services will bring in additional customers that may end up using some of the other financial services provided by this digital-first bank.
Then again, maybe not so much. Some commentators have argued that the impact of student loans will likely be limited at best. As InvestorPlace’s David Moadel recently pointed out, even SoFi CEO Anthony Noto has conceded this isn’t a big game-changer.
If Noto reiterates this view, and/or if guidance updates fail to show greater-than-expected growth ahead from this factor, shares could drop in response.
Even if this does not happen, investors could still decide to “sell the news,” using the release as an excuse to take profit.
The Silver Lining to a Post-Earnings Plunge
I know what you are thinking. Given the high chances of a post-earnings plunge for SOFI stock, why not sell/avoid it? Again, the factors that could drive a negative reaction from investors aren’t factors that do much damage to this stock’s long-term bull case.
Yes, plenty have looked to the return of student loan repayments as something that could help SoFi further grow its membership base. However, it’s not as if this neo-bank’s sole appeal is the fact that it is heavily involved in student loan refinancing.
There may be a reason Noto is so willing to concede student loan repayments will not do much to change the overall “story” with SoFi. As I discussed in prior SOFI coverage, Noto is confident his bank can win over “high earners not well-served” by the “old school” big banks.
In the years ahead, this strategy could pay off in a big way. SoFi is already on the cusp of profitability (based on analyst forecasts). Steady growth of its customer base will lead to outsized increases in profitability over time. In turn, this will justify an additional move higher for SOFI shares in the long-run, outweighing any near-term volatility.
The Best Move Before (and After) Earnings
There’s a clear takeaway with SOFI, when it comes to its upcoming quarterly results release.
If you currently own the stock, sit tight. Shares could give back some recent gains, but remember this does nothing to shatter the long-term bull case.
SoFi’s successful targeting of the affluent and tech-savvy, not the fact it offers student loan refinancing, points to many good things ahead: growth, profitability, and a higher price for shares.
If you currently do not own SoFi Technologies, there’s of course less urgency to rush into a position. Feel free to take your time, by slowly accumulating a “buy and hold” position in this name on weakness.
That said, if the market really overreacts to the upcoming earnings release, a post-earnings plunge may work in your favor when entering/adding to a position in SOFI stock.
SOFI stock earns a B rating in Portfolio Grader.
On the date of publication, neither Louis Navellier nor the InvestorPlace Research Staff member primarily responsible for this article held (either directly or indirectly) any positions in the securities mentioned in this article.
