After a massive 200% rally from August through January, SoFi Technologies (NASDAQ:SOFI) looked unstoppable. That momentum carried the fintech stock to a multi-year high at the end of January, supported by a streak of strong earnings reports. But instead of breaking out further, SoFi plunged 20% after its latest earnings report despite once again beating expectations.
The reason? Management's lighter-than-expected forward guidance. Investors, already sitting on huge gains, took the opportunity to lock in profits. But as the past week of gains has shown, the market, in all likelihood, overreacted. The bears have run out of steam, and bulls have rushed back in, pushing shares up 18% in the past five days. With momentum returning and the uptrend resuming, this looks like a textbook buy-the-dip set-up for investors who recognize the long-term growth story is still intact.
SoFi Posts Another Profitable Quarter, Reinforcing Its Turnaround
SoFi's end-of-January earnings report was strong across the board, even if the market didn't immediately reward it. Revenue climbed 20% year over year, marking another quarter of steady expansion. The company also delivered a profitable EPS print, extending its streak of quarterly profitability after consistent losses throughout 2022 and 2023.
One of the biggest positives was the record growth in members and product adoption. SoFi added 785,000 new members and 1.1 million new products, setting new company records. These numbers highlight continued demand for SoFi's financial services and reinforce its ability to scale at a high level.
But instead of rewarding these results, investors focused on management's softer forward guidance. Given the stock's massive run-up leading into earnings, this was enough to spark a wave of profit-taking. The initial reaction was understandable, but as the sharp rebound over the past week suggests, Wall Street may have been too quick to sell.
Wall Street Remains Confident in SoFi’s Long-Term Growth Potential
Adding fuel to this theory is the fact that many analysts remained confident in SoFi's long-term growth. Immediately after the earnings, Needham & Company reiterated its Buy rating and even raised its price target to $20. For those of us still on the sidelines, that implies there's nearly 25% upside from where shares were trading on Wednesday.
While some firms, including Goldman Sachs and UBS, maintained Neutral ratings, their stance appears to be based on valuation concerns rather than business fundamentals. With SoFi proving it can sustain profitability while growing aggressively, analysts still on the sidelines may soon be forced to adjust their outlooks higher.
SoFi’s Growth Story Is Strong, But Market Expectations Are High
Despite the renewed rally, there are still a few risks to consider. The biggest concern is whether SoFi's May earnings report will be strong enough to keep investor confidence high. While this quarter showed solid financials, another soft forward guidance update could lead to a more prolonged pullback.
Additionally, while Needham boosted its price target, some are taking a more cautious approach as they await further confirmation that SoFi can sustain its growth rates.
For Investors on the Sidelines, This Could Be the Moment to Act
From a technical perspective, SoFi's momentum is back on track. After weeks of selling, the stock has had a run of green days, signaling that buyers have regained control.
The RSI now sits at 57 and is trending higher, which historically signals that a stock has plenty of room to run before becoming overbought. With selling pressure fully exhausted and investors rotating back in, this could be one of the best entry points in months. If momentum continues, a return to January's highs, and potentially beyond, looks increasingly likely.
Watch This Space—SoFi’s Best Days May Still Be Ahead
SoFi's post-earnings drop wasn't about weak fundamentals but about investors overreacting to management's cautious outlook. The stock is regaining its footing, with revenue growth still strong, profitability intact, and bullish analyst support.
For those looking to capitalize on this fast-growing fintech leader, this pullback may have been the perfect reset before the next leg higher. Watch this space; the next stage of SoFi's rally is only getting started.