SOFI - $5 entry for long term investment?

Today I took a peak at the SOFI chart and noticed it seems to be at a nice entry point for a long term investment. So I searched “SOFI” in our forum to see what our collective brain has been up to re: SOFI. I was very surprised that such a popular name does not have a thread, so I am creating it now.

Disclaimer
I am not very experienced with fintech DD, and not very savvy with how fintech “should” be valued.

What is SoFi Technologies?
My understanding is that SoFi is meant to be a “one stop shop” for all things financial. This SeekingAlpha article says it best:

SoFi’s pitch is pretty simple, it’s a “One-stop shop for all your financial needs.” The products include checking and savings accounts, investment and crypto brokerage (including IRAs and robo-advisors), credit card, personal loans, student loans, mortgages, SoFi Relay (finance tracker, budgeting, and credit score tracking), insurance offerings, and other smaller products. They want to be there for and support their members (what they call their customers) through every part of their financial journey. The playbook they have is laid out by CFO Chris Lapointe (I’ve lightly edited his words for brevity and clarity):

There is a Reddit comment here allegedly from a SoFi employee, dropping bullish hints at future products to come.

Stock Price and Chart
Sometimes I watch Everything Money on YouTube. Essentially they are self-proclaimed “value investors” who do various analyses on stocks as well as macro. They have a proprietary software where you can input your own assumptions on future revenue growth, profit margins, P/E, etc. I have watched many of their videos and I can easily say that 95% of the time, their assumptions give price targets that are multitudes lower than current price, e.g. you would never buy anything after watching their videos. However, their SOFI video on September 23, 2022, shot out price target assumptions of $6.32 on the low side to $16.16 on the high side. The current stock price is $5.13. So even the super super conservative Everything Money agrees with going long on the current stock price.

Their growth assumptions and resulting PTs are pasted below. Note that the “Mid” PT should be ignored because the guy in the video mistakenly put in 35% revenue growth instead of 25% lol, but I would assume that the “mid” should be around $10 or $11 based on the pattern here.

Here’s the chart since deSPAC (yes SOFI was one of Chamath’s famous SPACs). SOFI is currently testing the ~$4.80 to $5.46 range which was also its YTD bottom in the month of May.

At current price, the valuation of SOFI is 4.75B. In Q1 2022 it did 1.1B in revenue and Q2 2022 it did 1.2B in revenue. The Price to Sales ratio for 2022 is looking to be a remarkably low ~1:1 ratio at this pace.

However, SOFI is still burning ~350M to 500M in Net Income every quarter, and holds 3.9B in debt with a cash position of 707.3M. Large debt is not good in a rising interest rate environment.

See summary of financial highlights below, courtesy of Koyfin.

Options Flow
Using a filter of 100K size, I observe that the large options on SOFI appear bearish in the short term and bullish in the long term from the non-Floor trades.

But the Floor trades are particularly bearish… and very large. :thinking:

The Chains with Highest OI tend to be calls, particularly for Jan 2023. I assume most of these were opened earlier in the stock’s history. However, notice the 40k OI on Jan 2024 10c and 28k OI on 7.5c.

Insider Trades
Holy crap this is nice to see.

After those gigantic sales in November 2021, I assume related to lock up expirations(?), it is abundantly clear that CEO Anthony Noto is bullish on his company. There is not a single sale on the page from Anthony. He has been buying all year long, along with Director Harvey Schwartz.

Analyst Price Targets
Bullish. Even the downgrades are at least 2X from current level.

Concluding Thoughts
I am thinking about a “set it and forget it” type of position on the Jan 2024 7.5c or Jan 2025 10c, or perhaps loading up on shares at the $5 range and then selling OTM CCs.

Again, I am not particularly savvy on fintech stocks and I am opening this thread up hopefully to rally the collective advantage of Valhalla.

One thing that I am not sure of is the impact of a recession in the US, or global recession, on SOFI. Financial products do not seem very recession-resistant …

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Thanks Kevin for throwing this together for contributions. Been wanting to do up a DD on this for awhile. I’ve been telling people for the last couple months that SOFI under $6 is a deal. At these current price levels it’s at though it’s practically a steal.

Here are the main reasons I’m bullish AF on SOFI for the future.

  1. SOFI originally started out as a student loan company. Of course as we all know student loans have been paused for the last 2 years due to Covid. Even though student loans were paused, SOFI’s loans are privately held and didn’t fall under the moratorium on payments. So they were still able to generate revenue off of their loans held during the pandemic unlike other lenders. Also, SOFI over the period of the pandemic was able to grow into a larger scale company branching out away from just student loans and diving into other areas of fintech. I personally don’t seen SOFI just making a a nice jump when the student loan moratorium ends. I expect them to continue to see more refinancing over time due to the fact that college will only continue to get more expensive in the future.

  2. 2023 is going to be a great year for SOFI. With the student loan pause ending in Jan 2023, SOFI will be opened up to a whole new group of people looking to refinance their loans because they haven’t had to worry about it for the last 2 years. In their Q1 2022 earnings call, CEO Anthony Noto said, “Our student loan borrowers weighted average income is $170,000 with a weighted average FICO score of 775.” He also stated that, “Prior to the pandemic, our student loan refinancing business had an average loan size of about $70,000.” So as you can see they don’t seem to be dealing with clients who are at a high potential risk of defaults

  3. In terms of growth, SOFI got their national bank charter in Feb. 2022. Yes, SOFI is a legit national bank now. And with this they have been able to expand their banking services to broaden what the company has to offer. They are now doing credit cards, personal loans, mortgage loans, savings/checking accounts, etc. They are also a broker that offers margin trading now. Their tools for revenue generation have just been steadily growing. One of SOFI’s primary means of revenue outside of these tools back in the day was by loan origination, holding these loans for a 3 month period, and then “selling paper” (bundled loan packages on their books) to other financial institutions for a profit. Since obtaining their charter though, they have been holding these loans on their books for up to 6 month period to collect more on interest payments before they decide to “sell the paper”.

  4. Galileo. Sofi acquired payment processing firm Galileo in 2020. With doing that, SOFI now has the ability to provide financial offerings for other fintech firms via APIs, like cards and ACH payments, effectively stepping into the supplier side of the fintech equation. Their account growth has just been steadily climbing as seen in their Q2 2022 earnings report showing they were up to 117 million accounts.
    Screenshot 2022-10-23 at 08-11-50 BUY SOFI @ $6.50 CATALYST

  5. CEO Anthony Noto. What can I say? Dude has been buying up shares like crazy which to me seems like he also sees these current price levels as a deal. Also, the guy has a hell of a resume and I truly think he’s doing great things with the company.

Anyways, these are just a few of the reasons I’m into SOFI for the long term. Currently holding about 5k shares in my TD account, and holding about 2k shares in my Webull account that I’ve been selling covered calls on weekly.

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Also, Q3 earnings for SOFI are supposed to be next couple of days on 11/01.

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When the stock hit 4.80 during the sell off 2 - 3 weeks ago, I sold all my positions and added a large chunk of my cash into SOFI holdings. Why? Because my 250k student loans from Navient were refinanced with them. And I want my interest payments back in stock appreciation dammit!

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I have a Limit Buy order placed for SOFI Jan 2024 7.5c at 1.05

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In the flow we must trust!


My position:

image

For the Steaks or Ramens Dinners!

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Alright just for fun I took a couple lottos with you for 11/11 6c at 0.37

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GL Kev! May the Bulls guide us to our tendies and may the bears taketh Jim Cramer’s picks.

Sold the 6c for 0.65, going back to sleep! Nice call out @Castle

Filled these leaps at 1.06 instead (SOFI Jan 2024 7.5c)

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These are 1.39-1.44 now (from 1.06 callout). I am holding FYI.

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I closed the SOFI calls for 1.36 cuz of the missile strike news and shit. Full cash everything everywhere just in case.

Back in SOFI Jan 2024 7.5c at 0.94

I am back in with shares as it approaches all time low.

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Got a bit unlucky with the timing of the Walter tweet reporting the investigation into SOFI’s crypto activity, but fortunately that didn’t send SOFI down much further as we are already near ATLs.

As long as we don’t make a new low below $4.77 and hold below there, e.g. $4.77 turning into resistance, I wouldn’t be worried.

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Video Transcript

DAVE BRIGGS: Let’s get a check on shares of SoFi now, down about 6% at the hour. The stock has been under pressure all day on news the Senate Banking Committee wants to review the company’s crypto activity. Four Democratic lawmakers raising concerns about the lack of crypto regulation, especially because SoFi operates as a bank holding company and a crypto exchange. In a filing with the Securities and Exchange Commission, SoFi says it has no exposure, though, to FTX’s bankruptcy and that crypto is a non-material part of its business.

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