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Monday, October 30

Sofi Surges On High Student Loan Demand

The OG Fintech play made a huge bet on attracting student borrowers and it's paying off

SoFi hulked out in their earnings call this morning as the company generated nearly a billion dollars in new student loans as borrowers are switching to the online bank in droves.

The Street was expecting a strong performance from SoFi, but nothing like this. Analysts predicted SoFi's attractive refinancing would bring $600 million in new loans to the company, but SoFi instead originated $919 million in a major coup. 

SoFi leveraged that massive boost to generate $531 million in net revenue. SoFi also managed to narrow their loss much more than analysts were expecting, hitting a mere  $0.03 loss per share. Member growth jumped 47% YoY to just shy of 7 million. More importantly, each of those members is becoming more and more likely to use more than one product in the SoFi ecosystem, as product utilization surged to 10.4 million. SoFi is bringing in way more customers by taking a risk on cheaper student loan refinancing and that bet is paying off as those borrowers utilize more and more of SoFi's ecosystem. 

On one hand, this is a dangerous moment for the economy as the resumption of student loan repayments could very easily stifle the recovery we've seen in consumer spending. On the other, efficient companies like SoFi are able to drive outsized growth from this resumption instead of just slowly draining interest fees out of the market. SoFi's efficiencies are really starting to pay off, and this can be a huge win moving forward as SoFi's growth accelerates toward profitability. SoFi shares jumped over 5% in premarket trading. 

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