Why SoFi, Janus Henderson, and Enova International Are Rising Today

What happened

Several financial stocks are higher today on the back of a bullish market and positive earnings results.

Stocks of digital bank and one-stop-shop financial services company SoFi (SOFI 3.32%) up about 7.5% at 12:44 p.m. ET. Now a global wealth manager Janus Henderson‘s (JHG 16.86%) Shares jumped 17% and shares of the online lending company Enova International (ENVA 12.75%) were up about 12%.

so what

Janus Henderson reported fourth-quarter results this morning, posting diluted earnings per share of $0.39 on total revenue of $515 million. Earnings fell short of analysts’ estimates, but revenue significantly exceeded them. Adjusted for one-off acquisition and transaction costs, Janus would also have significantly exceeded earnings estimates.

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“The current environment remains uncertain. Our focus will be on controlling what we can control and positioning Janus Henderson for growth,” Janus CEO Ali Dibadj said in a earnings release. “We have a strong balance sheet, good cash generation, disciplined investment teams and processes, and strict cost management.”

Janus’ assets under management (AUM) rose 5% to $287 billion in the quarter on a slowdown in US dollar strength and market developments. However, the company also saw $11 billion in outflows of assets under management. At the end of 2022, the AUM was still well below the value of 2021.

Enova released its fourth-quarter results after the market closed yesterday. The company reported diluted earnings per share of $1.56 on sales of $486 million. Enova missed analysts’ earnings estimates but beat them on an adjusted basis, and revenue also slightly beat expectations.

Charge-offs as a percentage of total loans, which is a good indicator of loan losses, reached 8.8% in the quarter, while the delinquency rate of more than 30 days reached 6.7%. Charge-offs rose only slightly from the third quarter of the year, while the default rate rose from 5.6%. Still, management of Enova’s earnings call expects revenue and adjusted earnings to grow faster in 2023 than the company’s lending growth, which is expected to be in the 10% to 15% range.

SoFi reported strong earnings results earlier this week that were well received by the market. Today, the fintech company seems to be on board Nasdaq Composite, a proxy for the broader technology sector, which is up more than 350 points. Tech stocks rebound after the Federal Reserve completed its first meeting of the year yesterday afternoon. The Fed hiked rates by a quarter point and made no comments, which surprised investors.

What now

Both Janus and Enova reported solid earnings results and saw their shares benefit significantly from the favorable market conditions today. If the Fed can end its rate-hiking campaign anytime soon, it will likely boost all three companies.

However, I’m not super optimistic about any of these names right now. Janus’ results are heavily dependent on stock market developments, which I think is still a bit of an uncertainty at the moment. Enova is aimed at a substandard borrower that could face greater difficulties in the event of a recession.

And while I like SoFi’s broader strategy, I still think the company looks expensive and gets too much credit from the market.