Earnings Reports (April 29th-May 3rd)
Taking a Look at Earnings Results for SoFi Technologies (SOFI) & STAG Industrial (STAG).
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1. SoFi Technologies (SOFI)
Despite SoFi Technologies (SOFI) surpassing expectations with its Q1 2024 earnings results, the company's stock plummeted after the announcement on Monday. Analysts had projected a modest profit of $0.01 per share on revenues of $556M for the quarter. Surprisingly, SOFI doubled the anticipated profits, reporting earnings of $0.02 per share and a robust revenue figure of $645M. Nevertheless, the stock experienced a downturn.
In the first quarter, the company's sales soared by 37% compared to the previous year, marking a promising beginning to the year. The company not only reversed its fortunes from a loss to a profit but also witnessed its total deposits increase by 16% to a record $3B. Moreover, SOFI's customer base is now considered of high quality, with a median FICO score of 774, which positions them as prime candidates for loans. Additionally, the company reported a strong net interest margin of 5.9%.
Despite these strong results, investor sentiment soured due to the company's future financial guidance.
Regarding the stock's viability, management predicts a faster-than-anticipated revenue growth for 2024, projecting it to reach about $2.4B with earnings expected to be at least $0.08 per share as per GAAP. However, concerns arose when SOFI's Q2 revenue forecast fell short of Wall Street's expectations, predicting between $555M and $565M against an anticipated $580M.
Investors seemed unnerved by this projection, but such worries may be overstated. If the company achieves even the lower end of its annual targets, it would represent an 89% increase in revenue, with earnings potentially growing at an even faster pace. By 2025, earnings are projected to triple and then double again by 2026, potentially bringing earnings per share close to $0.50.
Given these projections, a stock price of $6-$7 per share, which equates to around 14 times the earnings two years from now, appears undervalued for a fintech company scaling as rapidly as they are. Despite the sell-off, I believe the stock presents itself as a compelling buying opportunity for long-term investors. I will find ways to consolidate my SOFI position further.
2. STAG Industrial (STAG)
STAG Industrial (STAG) unveiled their Q1 2024 financial results this week signaling somewhat strong growth and operational achievements despite market fluctuations.
Key Financial Highlights of Q1 2024:
STAG reported a net income of $36.6M, or $0.20 per basic and diluted common share, a decrease from the previous year's $49.4M, or $0.28 per share.
Core FFO increased by 7.3% to $0.59 per diluted share, up from $0.55 in the first quarter of 2023.
The company saw a 9.7% rise in Cash NOI to $145.5M and a 7.1% increase in Same Store Cash NOI to $139.1M (healthy!).
Cash Available for Distribution grew by 8.9% to $98.1M.
STAG also reported strong leasing activities with the commencement of leases totaling 4.3 million square feet in its Operating Portfolio, which achieved a 30.5% Cash Rent Change and a 43.6% Straight-Line Rent Change. The company maintained an impressive Occupancy Rate of 97.7% across its total portfolio and 97.9% in its Operating Portfolio as of the end of the quarter.
During the quarter, STAG acquired a significant property, adding a 697,500 square foot building to its portfolio for $50.1M, reflecting a Cash Cap Rate of 6.1% and a Straight-Line Cap Rate of 6.8%. The acquisition underscores STAG’s ongoing strategy to expand its industrial footprint in key markets.
Capital Market Activities:
STAG successfully issued $450M of fixed-rate senior unsecured notes in a private placement on March 13, 2024, aimed at bolstering its long-term financial stability.
The company also refinanced a $200M Term Loan F on March 25, 2024, which was set to mature in January 2025, extending its maturity to March 25, 2027, with favorable fixed interest rates (smart moves!).
Leasing and Acquisition Insight: For more color on this front, the company's acquisition of a fully occupied building in Cincinnati, OH, adds a prime asset to its expanding portfolio. Furthermore, the company reported substantial lease renewals, with an 84.2% retention rate covering 4.2 million square feet of space due to expire in the quarter.
Future Outlook and Investor Confidence: Despite the drop in net income per share compared to the previous year, STAG has laid a solid foundation for sustained growth in 2024. The company has already addressed 81.2% of its expected leasing activities for the year, achieving a Cash Rent Change of 26.7%. This proactive approach in managing its lease expirations and new acquisitions positions STAG well for future revenue growth.
Bill Crooker, President and CEO of the company, expressed confidence in the company's trajectory, stating, "Building on a remarkable operational year in 2023, we've carried that momentum into the first quarter of 2024, achieving excellent internal growth including a significant increase in Same Store Cash NOI." Crooker added, "With the capital markets beginning to stabilize, STAG is poised to capitalize on strategic transactions, though we remain cautious in this volatile environment."
STAG remains optimistic about its performance through 2024, backed by strong fundamentals and strategic market maneuvers. With a clear focus on high-quality acquisitions and maintaining high occupancy rates, they are indeed well-equipped to navigate the complexities of the industrial real estate market. I think investors should look beyond the recent short-term fluctuations and focus on the company's continued market expansion and solid financial health. STAG will remain a top position in my portfolio.