$SOFi is Bloomberg's Top Idea!

Bloomberg Fintech analyst Julie Chariell cites SoFi as her top idea! Lot's of good charts I wasn't able to pull in. But hope this is good enough for you apes. $SOFI to the moon! SoFi Can Win Lending, License, Super App Triple Crown: BI Focus Contributing Analysts Aditya Kulkarni Estimates on SoFi may understate a better lending environment and super-app adoption next year, with our 2022 scenarios pointing to 63% revenue growth vs. a 50% consensus, and potential for a banking license to drive 76% Ebitda upside. Such results imply the stock trades at a 15-25% discount vs. mobile-financial, fintech and bank-technology peers. (10/21/21) Rosier 2022 on Student-Refinance Recovery, App Surge Strong App-Product Growth Meets Recovering Loans📷Source: Company reportsDataChart The 2022 outlook is better for SoFi's lending business, considering that student-loan deferrals will likely end in January as authorized, allowing refinancing activity to return. CEOs at big banks have been constructive on a consumer-lending pickup. If active users and downloads of SoFi's banking super app continue the upward trajectory, we expect their contribution to the Financial Services segment to be more meaningful. Combined, these can generate 63% revenue growth next year, based on our scenario analysis, 13 percentage points above consensus. In addition, SoFi will learn whether the Federal Reserve and the Office of the Comptroller of the Currency grant it a banking license. Separate from our scenario, this additional catalyst puts 2022 Ebitda more than 70% above the company's pre-license expectations. (10/21/21) Bank License, 2022 Guidance Redux Can Unlock Value We believe these catalysts could act as important triggers for this idea in coming months. (10/21/21) Timeline of Key Catalysts: 4Q: Discussion of 2022 guidance may point to higher growth in the lending segment, mostly on the February return of student-loan refinancing, and even faster growth in financial services 4Q/1Q22: Banking license may be awarded with approval of the acquisition of Golden Pacific Bancorp January: BI quarterly App Tracker may show continuing 80-100% growth in SoFi’s banking app active users 2H22: Continued growth in the financial services segment, surpassing 10% of 2022 revenue (from 4% in 2021), driven by adoption of SoFi's banking super app SoFi’s Lending Constraints Set to Lift in January Contributing Analysts Aditya Kulkarni 3Q Management Commentary📷Source: 3Q'21 Earnings Call Transcripts SoFi's lending business may be poised for stronger growth in 2022 after a period of soft student-loan refinancing (55-60% of its book). The U.S. government's student-loan payment-deferral program, launched in the early days of the pandemic, is set to expire in January. Other lending may improve as well if executives at major banks are right about rising loan demand next year as consumers exhaust savings. SoFi already has momentum, since originations climbed to 82% of pre-pandemic levels in 2Q vs. 71% in the prior quarter, with personal loans soaring 188%. SoFi may also see an acceleration in users of its banking super app, as younger, tech-savvy customers are improving their financial profiles with investments and sustained employment, and prefer neobanks such as SoFi to big banks, which are in pursuit. (10/21/21) Banking License Key Margin Expansion Catalyst Contributing Analysts Aditya Kulkarni Read Research Note: Adjusted Ebitda Margin With vs. Without Charter📷Source: Bloomberg IntelligenceExhibit If SoFi is granted a national bank charter, its Ebitda margin could jump as much as 15 percentage points in year one, with a cumulative $1 billion in Ebitda added through 2025, according to the company. SoFi can lower its cost of capital and extend loan holding periods without relying on, or sharing economics with, a third-party bank. It could offer members more options for deposits and use those to fund loans, attracting members with lower interest rates on loans, higher rates paid on deposits, and still no other fees. In March, SoFi agreed to buy Golden Pacific Bancorp and changed its de novo bank charter application to a change-of-control one, under review by theFederal Reserve. A decision can come at any time, and SoFi is already backing it with $1.2 billion in senior notes issued earlier this month. (10/21/21) Two Scenarios Point to Stronger 2022 2022 Outlook: Original SoFi v. Bloomberg Scenario📷Source: Bloomberg Intelligence SoFi is poised to partake in the improved outlook for banks next year, assuming higher interest rates and demand for lending. This, combined with the return of student-loan refinancing (nearly 60% of SoFi's 2020 loan balances), is reflected in our 2022 scenario. We see top-line growth of 63%, compared with 53% based on guidance earlier this year. This assumes stronger growth in lending, which fuels greater adoption of SoFi's one-stop super app, one of the earliest. A separate scenario is based on SoFi's case to be a bank. If this happens via a banking charter approved as part of the proposed Golden Pacific Bancorp acquisition, 2022 Ebitda may be 76% higher than SoFi's steady-state expectation, and 45% more than our scenario. (10/21/21) High Growth Can Push Value Above Fintech Peers As the first neobank to go public, SoFi lacks direct comparisons, so we consider a weighted average of peers in three reporting segments. Premiums are paid for those like SoFi with strong growth, defined paths to better profitability and digital-first business models that can steal share from legacy competitors. Based on a weighted average of 2022 price-to-sales multiple of 12x and enterprise value-to-Ebitda ratio of 50x, applied to our above-guidance revenue scenario and company estimates with a banking license, SoFi shares would be valued at $25-$28. Established fintech peers focused on digital wallets, lending and banking infrastructure trade at single-digit multiples given lower growth. Recently public competitors including Upstart, Coinbase and Marqeta are seeing stronger growth and higher multiples. (10/21/21) SoFi Valuation and Peer Analysis📷

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$SOFi is Bloomberg's Top Idea!

bullish

Bloomberg Fintech analyst Julie Chariell cites SoFi as her top idea! Lot's of good charts I wasn't able to pull in. But hope this is good enough for you apes. $SOFI to the moon!

SoFi Can Win Lending, License, Super App Triple Crown: BI Focus

Contributing Analysts Aditya Kulkarni

Estimates on SoFi may understate a better lending environment and super-app adoption next year, with our 2022 scenarios pointing to 63% revenue growth vs. a 50% consensus, and potential for a banking license to drive 76% Ebitda upside. Such results imply the stock trades at a 15-25% discount vs. mobile-financial, fintech and bank-technology peers. (10/21/21)

  1. Rosier 2022 on Student-Refinance Recovery, App Surge

Strong App-Product Growth Meets Recovering Loansđź“·Source: Company reportsDataChart

The 2022 outlook is better for SoFi's lending business, considering that student-loan deferrals will likely end in January as authorized, allowing refinancing activity to return. CEOs at big banks have been constructive on a consumer-lending pickup. If active users and downloads of SoFi's banking super app continue the upward trajectory, we expect their contribution to the Financial Services segment to be more meaningful. Combined, these can generate 63% revenue growth next year, based on our scenario analysis, 13 percentage points above consensus.

In addition, SoFi will learn whether the Federal Reserve and the Office of the Comptroller of the Currency grant it a banking license. Separate from our scenario, this additional catalyst puts 2022 Ebitda more than 70% above the company's pre-license expectations. (10/21/21)

  1. Bank License, 2022 Guidance Redux Can Unlock Value

We believe these catalysts could act as important triggers for this idea in coming months. (10/21/21)

Timeline of Key Catalysts:

  • 4Q: Discussion of 2022 guidance may point to higher growth in the lending segment, mostly on the February return of student-loan refinancing, and even faster growth in financial services
  • 4Q/1Q22: Banking license may be awarded with approval of the acquisition of Golden Pacific Bancorp
  • January: BI quarterly App Tracker may show continuing 80-100% growth in SoFi’s banking app active users
  • 2H22: Continued growth in the financial services segment, surpassing 10% of 2022 revenue (from 4% in 2021), driven by adoption of SoFi's banking super app
  1. SoFi’s Lending Constraints Set to Lift in January

Contributing Analysts Aditya Kulkarni

3Q Management Commentaryđź“·Source: 3Q'21 Earnings Call Transcripts

SoFi's lending business may be poised for stronger growth in 2022 after a period of soft student-loan refinancing (55-60% of its book). The U.S. government's student-loan payment-deferral program, launched in the early days of the pandemic, is set to expire in January. Other lending may improve as well if executives at major banks are right about rising loan demand next year as consumers exhaust savings. SoFi already has momentum, since originations climbed to 82% of pre-pandemic levels in 2Q vs. 71% in the prior quarter, with personal loans soaring 188%.

SoFi may also see an acceleration in users of its banking super app, as younger, tech-savvy customers are improving their financial profiles with investments and sustained employment, and prefer neobanks such as SoFi to big banks, which are in pursuit. (10/21/21)

  1. Banking License Key Margin Expansion Catalyst

Contributing Analysts Aditya Kulkarni

Read Research Note: Adjusted Ebitda Margin With vs. Without Charterđź“·Source: Bloomberg IntelligenceExhibit

If SoFi is granted a national bank charter, its Ebitda margin could jump as much as 15 percentage points in year one, with a cumulative $1 billion in Ebitda added through 2025, according to the company. SoFi can lower its cost of capital and extend loan holding periods without relying on, or sharing economics with, a third-party bank. It could offer members more options for deposits and use those to fund loans, attracting members with lower interest rates on loans, higher rates paid on deposits, and still no other fees.

In March, SoFi agreed to buy Golden Pacific Bancorp and changed its de novo bank charter application to a change-of-control one, under review by theFederal Reserve. A decision can come at any time, and SoFi is already backing it with $1.2 billion in senior notes issued earlier this month. (10/21/21)

  1. Two Scenarios Point to Stronger 2022

2022 Outlook: Original SoFi v. Bloomberg Scenariođź“·Source: Bloomberg Intelligence

SoFi is poised to partake in the improved outlook for banks next year, assuming higher interest rates and demand for lending. This, combined with the return of student-loan refinancing (nearly 60% of SoFi's 2020 loan balances), is reflected in our 2022 scenario. We see top-line growth of 63%, compared with 53% based on guidance earlier this year. This assumes stronger growth in lending, which fuels greater adoption of SoFi's one-stop super app, one of the earliest.

A separate scenario is based on SoFi's case to be a bank. If this happens via a banking charter approved as part of the proposed Golden Pacific Bancorp acquisition, 2022 Ebitda may be 76% higher than SoFi's steady-state expectation, and 45% more than our scenario. (10/21/21)

  1. High Growth Can Push Value Above Fintech Peers

As the first neobank to go public, SoFi lacks direct comparisons, so we consider a weighted average of peers in three reporting segments. Premiums are paid for those like SoFi with strong growth, defined paths to better profitability and digital-first business models that can steal share from legacy competitors. Based on a weighted average of 2022 price-to-sales multiple of 12x and enterprise value-to-Ebitda ratio of 50x, applied to our above-guidance revenue scenario and company estimates with a banking license, SoFi shares would be valued at $25-$28.

Established fintech peers focused on digital wallets, lending and banking infrastructure trade at single-digit multiples given lower growth. Recently public competitors including Upstart, Coinbase and Marqeta are seeing stronger growth and higher multiples. (10/21/21)

SoFi Valuation and Peer Analysisđź“·

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