We’re now past the onslaught of Q1 earnings season. Earlier this week, SoFi (SOFI) released its Q1 earnings, and the stock got butchered despite beating on both the top line as well as the bottom line. The stock, which was already underperforming the markets by a wide margin in 2024, further extended its losses.

SoFi has recovered somewhat from the lows, and is higher today as well, despite the Fed maintaining its status quo on interest rates, and Chair Jerome Powell virtually ruling out a cut at the next meeting as well.

Is SoFi stock a buy after the recent underperformance? We’ll discuss in this article, beginning with a snapshot of its Q1 earnings.

Why Did SoFi Stock Fall After the Q1 Earnings Report?

SoFi reported revenues of $580.6 million in Q1. The metric rose 26% YoY, and easily surpassed the $555 million that analysts expected. Its earnings per share (EPS) came in at 2 cents, which was double what the markets expected.

The company also raised its full-year revenue guidance to $2.39 billion-$2.43 billion, and upped its adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) guidance to $590 million-$600 million.

However, its Q2 guidance fell short of Street estimates. The fintech company expects to post revenues between $555 million and $565 million in the current quarter, which fell well short of the nearly $581 million that analysts expected. Also, its net income guidance of $5 million to $10 million was lower than consensus estimates of $13.9 million.

What’s Making Investors Apprehensive About SoFi Stock?

While the light Q2 guidance played a part in SoFi’s post-earnings crash, other factors are also at play in driving its YTD underperformance. First, there are concerns over credit quality, as the finances of lower-income households are under stress - leading to higher delinquencies across lenders.

On a related note, there are concerns over SoFi’s loan book and its fair value. SoFi might need to mark down these loans or sell them at a discount if credit losses rise.

We also have the continued hanging sword of student loan forgiveness, as President Joe Biden has been gradually canceling some loans after his total loan forgiveness program was struck down by the Supreme Court last year.

Should You Buy SoFi Stock?

While there are some valid concerns around SoFi’s short-term outlook, I believe the risk-return dynamics look quite attractive after the recent fall. Here’s why:

• Anticipating challenging macros, SoFi has slowed lending and expects its 2024 lending revenues to be between 92%-95% of 2023 levels. The company has the bandwidth to increase lending if conditions become conducive, as its capital ratios are well above the minimum regulatory requirements.
• SoFi has a reasonably good borrower profile, as the weighted average income of its personal loan borrowers is $169,000 while their weighted average FICO score is 746. Similarly, the weighted average income and weighted average FICO score of student loan borrowers is $146,000 and 768, respectively.
• The concerns over the fair value of its personal loan book might be overblown, as the company marked them at 104.2% at the end of Q1 – below the 105.7% blended rate that it achieved on the $1.2 billion in personal loan sales during the quarter.
• The company has scope to grow its business through cross-selling, given its member count swelled to 8.1 million at the end of Q1. SoFi could potentially offer these customers multiple other products – including credit cards.
• The stock's tangible book value per share is rising gradually, and increased 16% sequentially to $3.92 in Q1, which gives us a price-to-tangible book value multiple of 1.76x. The company expects its tangible book value to rise by between $500 million and $1 billion in 2024 – with the top end of the updated guidance being double the previous forecast.
• SoFi’s valuations also look quite attractive. It trades at a next 12-month (NTM) price-to-sales multiple of 3.01x and an NTM price-to-earnings (PE) multiple of 72.8x. While the NTM PE might look high, the multiple should normalize over the next couple of years as the company’s earnings rise. SoFi issued a 2026 EPS guidance of $0.55-$0.80, so the 2026 price-to-earnings (PE) multiple is only 8.65x, at the top end of its guidance.

Wall Street is not as bullish on SoFi stock, though, and it has a consensus rating of “Hold” from the 18 analysts in coverage. However, its mean target price of $9.16 is over 32% higher than yesterday’s closing price.

SoFi expects its GAAP EPS to rise between 20%-25% post-2026, and the company has a strong management team to execute the plan. Not many companies bring the prospects of such profitable long-term growth to the table – especially with reasonable valuations. 

Overall, SoFi is one growth stock that looks like a tempting buy after getting butchered on its Q1 report. While the stock might whipsaw in the short term, it looks like one growth name worth holding for the long term.