Why SoFi Stock Dropped 12% in September
Key Points
SoFi added 1.1 million new customers in the second quarter, a 35% year-over-year increase.
The lending and financial services segments are growing quickly, and profits are following suit.
The market has been concerned about SoFi stock based on a short-seller report and guidance that didn't meet expectations.
The banking sector has taken a hit from high interest rates and bond yields.
SoFi Technologies (NASDAQ:SOFI) stock fell 12% in September, according to data provided by S&P Global Market Intelligence. Rising bond yields, high interest rates, and overall market volatility are weighing on the stock price.
Is it all about growth?
The market's reaction to SoFi stock would be unexpected based on the company's recent performance. It's growing fast, becoming more profitable, launching innovative products, and adding customers at a rapid pace.
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Here are some of the second-quarter highlights: 1.1 million new customers joined the platform, a 35% increase over last year, for a total of 15.8 million. Adjusted net revenue increased 40% year over year to $1.2 billion, and earnings per share (EPS) rose $0.08 to $0.12.
The company is increasingly moving into artificial intelligence- and blockchain-based products, including cryptocurrency trading on the platform and an AI-prompted investing tool. These are in addition to its traditional banking services and are part of management's goal of becoming a "one-stop shop" for financial services.
SoFi started out as a lender, and lending is still its largest segment. Lending revenue increased 63% over last year in the second quarter, and the financial services segment, which is predominantly fee-based, low-cost products, increased 29%.
SoFi also has a financial infrastructure product called the Tech Platform segment. While it has used these tools successfully for its own enterprise, as a business-to-business venture, it has been a bit of a bust. In the second quarter, revenue decreased by 23% due to a large client leaving the platform at the end of 2025, so there are still likely to be declines in the third and fourth quarters.
Why the market is wary
The recent stock drop isn't exclusive to SoFi; bank stocks as a category are down right now due to upheaval in the bond market and high interest rates.
However, SoFi has been under pressure all year for various reasons; there was a short-seller report with accusations of misstating some of its accounting and concerns after management didn't raise guidance in accordance with market expectations, and now, the market is worried about SoFi's credit metrics in this tricky environment more than some of the large and stable banks.
At the current price, SoFi stock trades at 33 times trailing 12-month earnings and 1.8 times book value, and looks like a value at these levels. Given the nature of the operating climate, there may be further downside. However, if you can hold onto the stock for at least five years, this could be a good time to buy.
Jennifer Saibil has positions in SoFi Technologies. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.