OppFi Q1: Revenue Grows but Charge-Offs Pressure Earnings, Underwriting Model Under Scrutiny

What happened

OppFi reported higher Q1 2026 revenue driven by receivable growth, but adjusted earnings fell as net charge-offs rose to 35%+ of revenue, exceeding the prior year's level. Management highlighted strategic moves toward a tech-enabled banking platform, but the near-term credit deterioration stems from early-vintage loans originated before Model 6.1's full deployment. The company reiterated its FY 2026 adjusted EPS guidance of $1.54-$1.60, implying a forward P/E below 8x, yet the elevated charge-offs raise doubts about sustainable profitability. The DeepValue report had already flagged credit containment as the key risk, with a bear-case $6.00 if NCOs hit 38% of revenue. This quarter's data point moves the needle closer to that bear scenario, underscoring the need for Model 6.1 to prove its efficacy in coming quarters.

Implication

Investors should await at least one more quarter of post-Model 6.1 credit data before establishing positions. The elevated charge-offs validate the bear-case scenario where credit normalization fails to materialize, putting pressure on earnings and potentially covenant headroom. While the stock trades at a low forward P/E, the earnings are at risk if charge-offs persist. The next catalyst is the Q2 2026 release, which will show the first full quarter of Model 6.1 impact. Until then, the risk/reward is unfavorable, with downside to $6.00 if credit deteriorates further.

Thesis delta

The initial thesis assumed credit would stabilize with Model 6.1; Q1 2026 charge-offs contradict that assumption. The likelihood of a bear-case outcome has increased, shifting the thesis from 'wait for proof' to 'high risk of deterioration.' The investment case now hinges more critically on Model 6.1's ability to reverse the charge-off trend in upcoming quarters.