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$SOFI to Fly - A king of FinTech
Jul 21, 2021
bullish
general Analysis
[6 min Read]
SOFI to Fly Pre earnings 8/12
I have read so many DD's on this sub regarding SOFI. Many of those DD's were just people trying to pump their position in order get some tendies. I will make sure to only summarize and include some parts of those DD's that were not meant for pump & dump. This is a NON BIASED SOFI DD & Analysis. Let's get started -
What is SOFI?
Social Finance, Inc aka SoFi is an American online personal finance company. A mobile-first service based in San Francisco, SoFi provides a suite of financial products that includes student loan refinancing, checking accounts, mortgages, personal loans, credit cards, stock investing and banking through both their mobile app and desktop interfaces. It is an ALL in one app for all your financial and investing needs.
Look at the products sofi has to offer. The company has an amazing easy to use user interface and very smooth app.
What separates SOFI from other competitors?
The one single factor that gains Sofi a lot of revenue and sales is "Convenience". Because they provide a lot of services, they are able to attract their customers to get different products.
Let's say you decide to buy a car and go to Sofi for a car loan. The Sofi team asks you to provide your Social security, pay stubs, previous bills, etc. and then finally grants you a car loan. Now, let's say after 3 months your friend who has been making a bank trading AMC and GME tells you to invest and you don't have a brokerage account. You eventually would end up knocking SOFI's door and ask them to let you invest because why the fuck would you want to fill out forms and apply at other brokerages. Now, let's say after couple of months of trading, you end up losing all your money because you're an APE who yolo'ed entire savings into 1st ever options play. Now, you need money for that business degree because you suck at investing. What would you do here? Would you go to some student loan company and fill out all the forms, provide credit history, etc. or would you just call up SOFI and ask them to loan you some tendies? The simple answer is "Call up SOFI" because it's convenient.
SOFI also came up with IPO investing.
You can now invest in IPO's even before they're traded on an exchange. Cool, innit?Unlike Robinhood, SOFI would never restrict the sale of the securities to the members in secondary markets. However, if you invest in an IPO and sell within 30 days then you might be restricted from IPO purchase for next 30 days or so. More details can be found on their website -
History of SOFI & how did it become such a big company
SoFi was founded in 2011 by Mike Cagney, Dan Macklin, James Finnigan, and Ian Brady, four students who met at the Stanford. The founders hoped SoFi could provide more affordable options for those taking on debt to fund their education. The company's inaugural loan program was a $2 million pilot at Stanford. For this pilot, 40 alumni invested about $2 million in approximately 100 students, for an average of $20,000 per student.
The founders were soon able to raise $1billion from softbank few years ago. The company is very successful and trading way below their valuation price.
Let's have a look at the SOFI's chart this year
This is 1 year chart for Sofi, it has a very very strong support at 15$. The stock has gone below 15$ only twice in 2021 and then rallied the following 2 weeks. The movement of this stock is like a spring, a huge dip is followed by an insane highs. The earnings are due 8/12 and I strongly believe that this stock will run before the earnings.
Price Targets
Michael Miller, an equity analyst at morning star said that $20.50 is a Fair Value for this stock. It's currently trading at $15.10 at the time of writing this DD. That's an upside of 25%.
Summary of why is SOFI a good play?
- A very strong support at 15$ price, in the last 7-8 months, this stock has rallied after a huge dip. With the earnings coming up for this company, I am positive that there will be a rally.
- Sofi is positioned to be a #1 leader in the fintech sector. They are jacks of all trades and offering different products to their customers all within one app or website.
- Convenience of being able to apply for student loans, investing, mortgages will attract consumers because who wants to end up applying at different companies for different needs.
- Sofi acquired GALILEO which is a very big company. You haven't heard of this company yet because it's a B2B company. Sofi paid about 1.2B$ for it. They're basically a payment processing platform like stripe, square, paypal etc which is used by all top fintech companies around the globe.
- The main goal of SOFI is to be able to provide as many products and services they can to their consumers. They are soon going to be a OneStopShop. Their goal is to basically become an amazon of FinTech and provide all the services in one place. By acting as a one-stop shop for its customer's finances, SoFi intends to create powerful cross-selling advantages that will reduce its cost of acquisition and give it a competitive advantage in the marketplace.
- SOFI has acquired Golden Pacific Bancorp and applying to become a national bank in the US.
- The company saw its client growth accelerate in 2020, with more than 2.2 million members on its platform by the end of the first quarter of 2021.
- The company's expanded product lineup along with increased adoption of digital banking during the pandemic has helped accelerate SoFi's growth, with the number of members increasing by nearly 80-90% in 2020. Rapid growth has continued into 2021, and SoFi remains the only company utilizing a digital full-service model, giving it a clear product niche. Source - morningstar
- It is projected that SOFI would get an approval to become a bank in late 2021 or early 2022.
- It is projected that revenue will increase at a 43% CAGR over the next five years as the company benefits from its unique product offering as well as the revenue contributed by its 2020 acquisition of Galileo, which is only the one section of SOFI.
- During the company's SPAC merger, the company issued equity to PIPE investors to raise more than $1.2 billion in capital, on top of the $800 million that was generated by the SPAC merger itself. This along with debt paydown that occurred both immediately prior and during the SPAC merger has left the company in a good financial position.
- SoFi has more than $2 billion in cash and over $4 billion in debt, but that entire debt money is used to finance its lending activities. I believe that there is only little financial risk for SoFi, and incase company decides to re strategize their investment decisions then they would have plenty of money to do so.
- The adjusted Net Revenue and EBITDA are increasing and trending in the right direction, with 151% and 70% growth YOY respectively and the total products used by members has grown by 121% YOY and financial products has grown 273% YOY.
TLDR ;
Not a Finance Advice
The stock could rally prior to earnings on 8/12
$18-$20 calls expiring 8/20
Position-
50 contracts, strike 20$ expiring 8/20
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