Shares slid in premarket trading on Thursday after the financial services platform cut its forecast to reflect the impact of the Biden administration’s decision to extend the pause on student loan payments.
The student loan moratorium was due to expire on May 1, but will run until August 31, the Department of Education announced on Wednesday.
) adjusted its full-year guidance on Wednesday, saying management “now expects a number of factors, including the looming midterm elections in the fall, to precipitate a likely seventh extension beyond August 2022 by the administration”. SoFi derives about three-quarters of its revenue from its lending segment.
As a result, the company now assumes that loan repayments will not start again throughout 2022.
SoFi’s new forecast calls for net revenue for the year to be $1.47 billion, down from previous projections of $1.57 billion. Adjusted Ebitda, or earnings before interest, taxes, depreciation and amortization, could be around $100 million, down from $180 million previously.
The company maintained its original guidance of $280 million to $285 million in adjusted net revenue for the first quarter of 2022. Adjusted EBITDA for the quarter could range between $0 million and $5 million.
The stock was down 5% at $8.32 in premarket trading. It has lost 45% this year.
Despite the stock’s pullback, some analysts said they weren’t surprised by the news and it didn’t affect their base investment assumption.
“SOFI’s guideline decline due to President Biden’s student loan moratorium extension is not surprising,” Mizuho Securities analyst Dan Dolev wrote. “The specter of an extension has hung over the title for weeks.”
He added that while some investors may see the shift in guidance as a sign of other potential weak spots, he “didn’t see any additional weakness.” It maintained a Buy rating on the stock, even as it lowered its 2022 revenue and EBITDA estimates as part of the moratorium extension. It also cut its price target to $14 per share from $17 to reflect lower near-term earnings and a challenging overall environment for fintech stocks.
Wedbush’s David Chiaverini also maintained an outperform rating on the stock, but cut his price target to $15 per share from $20 to reflect what he sees as a temporary headwind. He was always optimistic about the company’s growth prospects, increased brand presence and membership growth, and the integrated technology platform that “enables a seamless cross-buy experience intended to a cohort of young digital natives”.
“We believe SOFI’s valuation is attractive relative to its growth prospects,” he wrote in a research note on Thursday.
Of the 14 analysts covering the stock polled on FactSet, eight rated it a buy, while six rated it a hold. The average target price is $15.35.
Write to Sabrina Escobar at [email protected]