SoFi: "Is the 2026 EPS guidance within reach!?" - Part 1 -
SoFi has provided guidance of $0.55 to $0.80 in earnings per share (EPS) for 2026. Since the current stock price is around $13, this corresponds to a P/E ratio of approximately 16x to 24x based on the 2026 projected EPS, which does not seem particularly expensive.
However, the 2026 EPS guidance of $0.55 to $0.80 is two to three times the 2025 EPS guidance of $0.27 to $0.28, which was revised upward during the Q1 2025 earnings announcement. I will examine whether achieving this is realistic.
※Please note in advance that the following is "just one of many possible scenarios".
・Adjusted net revenue
The compound annual growth rate from Q1 2023 to Q1 2025 is 29%. Based on this, if we calculate the 2025 and 2026 revenue from the 2024 actual results, we get $3.37 billion and $4.37 billion.
・Adjusted EBITDA
To calculate Adjusted EBITDA from revenue, we first need to calculate each operating expense item. Therefore, similar to revenue, I will calculate the compound annual growth/decline rate from Q1 2023 to Q1 2025 and determine each expense item for 2025 and 2026 based on the 2024 actual values.
And as a result of calculating by taking into account various expenses and adjustment items from revenue, the 2025 and 2026 Adjusted EBITDA will be $1.05 billion and $1.58 billion.
・Adjusted Net Income
Adjusted Net Income can be obtained by subtracting "stock-based compensation expenses," "depreciation and amortization," "interest expenses," and "corporate taxes" from Adjusted EBITDA. (There are other minor items, but if you keep these four in mind, there is generally no problem.)
Therefore, as before, I will calculate the compound annual growth/decline rate from Q1 2023 to Q1 2025 and calculate the "stock-based compensation expenses," "depreciation and amortization," and "interest expenses" for 2025 and 2026 from the 2024 actual values.
Then, by subtracting these expenses from Adjusted EBITDA and multiplying the remaining profit by a tax rate of 26% to obtain Adjusted Net Income, the 2025 and 2026 Adjusted Net Income will be $380 million and $750 million.
・Adjusted EPS (Adjusted Earnings Per Share)
For the number of shares used to calculate earnings per share, I will similarly calculate the compound annual growth rate from Q1 2023 to Q1 2025 and determine the number of shares for 2025 and 2026 from the 2024 share count.
Finally, when dividing Adjusted Net Income by the number of outstanding shares, the 2025 and 2026 Adjusted EPS will be $0.32 and $0.56, and as a result of calculations based on the compound annual growth rate from 2023, it is expected that the lower end of the 2026 EPS guidance of $0.55 to $0.80 is achievable.
Yay, we did it, happy ending, happy ending♪ Clap, clap, clap, clap♪...,
It is still too early to rejoice.
Calculating the Adjusted EBITDA Margin mentioned above results in the following, and although the profit margin is on an upward trend year by year, a 36% profit margin in 2026 is honestly too high. (It is clearly an overshoot from SoFi's 30% target)
Therefore, since exploring further acceleration of revenue is closer to reality, next time, I will delve deeper into the simulation to see how much revenue could potentially grow.
P.S. The 26% tax rate used when calculating Adjusted Net Income is based on the tax rate announced as 2025 guidance. However, calculating the effective tax rate for Q1 2025 results in 10.9%. Therefore, there is a possibility that Adjusted EPS could be pushed up if the effective tax rate is lower than expected, but I have not adopted that approach because it is not wise to rely on it. In fact, SoFi also expects a 26% tax rate for the remaining three quarters of 2025.
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