SoFi's earnings report was almost perfect, so why did the stock price still drop by nearly 10%?

$SoFi Tech(SOFI.US)

After reading SoFi's earnings report, my first reaction was actually the same as many others.

Revenue exceeded expectations, profits exceeded expectations, membership continued to grow, deposits continued to grow, and full-year revenue guidance was also raised again.

If looking at this earnings report alone, I would give it an 80 or even 90.

Then why did the stock price still drop nearly 10%?

I think what truly deserves research is not SoFi, but the capital market.

When we retail investors study earnings reports, we focus on two questions:

How much money was made? Did it exceed expectations?

But when institutions study earnings reports, they focus on two other questions:

Can it continue to exceed expectations in the future? Has there been any change in profits over the next three years?

This is why, for the same earnings report, retail investors think it's great, while institutions choose to sell.

Stock trading has never been about the past, but about the future.

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In this earnings report, I noticed a few details that are easily overlooked.

First, SoFi continued to raise its full-year revenue guidance.

Theoretically, this is a good thing.

However, what the market truly wants to see is not just increased revenue, but also synchronized profit growth.

Revenue growth does not necessarily mean profit growth.

If revenue increases, but more marketing expenses, R&D costs, or operating costs need to be invested in the future, then final profits may not increase.

Institutions will recalculate cash flows for the coming years, rather than staring at how much money was made in this quarter.

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Second, and what I consider the most critical point.

Lending business is no longer SoFi's biggest area of imagination.

What truly determines its valuation has always been the Technology Platform (technology platform business).

Every bank does lending.

But the technology platform business is different; it determines whether SoFi should be valued as a bank or as a fintech company.

If the technology platform business resumes high-speed growth, then the high valuation has support.

If long-term growth is sluggish, then the market will naturally slowly view it as an excellent bank, rather than a high-growth fintech company.

These two valuations could differ by several times.

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One more thing

At 2 AM today, the Federal Reserve will announce its latest interest rate decision.

For institutions, this is a macro event bigger than a single company's earnings report.

If they were already planning to adjust positions, many funds will choose to reduce risk first,

waiting until after the interest rate meeting to decide whether to buy back in.

Therefore, today's sharp drop does not necessarily mean institutions have negated SoFi.

It might just be a risk management move before a major event.

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So, I won't assume SoFi has problems just because it dropped nearly 10% in one day.

I am more concerned about the next few trading days.

If funds flow back in after the interest rate decision is implemented, it indicates that today's movement was more of a position adjustment driven by events.

If the earnings are excellent and the interest rate decision is implemented, yet the stock price continues to fall with heavy volume, then it means institutions are truly starting to lower their expectations for SoFi's future years.

Investing is not about predicting stock prices, but constantly correcting one's own judgments.

This is also why I now spend less time guessing whether the market will rise or fall, and prefer to research: what exactly institutions are repricing.