I’ve seen a ton of posts about trading SOFI and short squeezes etc. but I’m investing in SoFi for the LONG TERM and here’s why:
- SoFi actually had positive EBITDA in Q1 and is forecasting $27M in EBITDA for 2021! How many high growth, recent IPO’s can say that! SoFi is forecasting $254M EBITDA in ’22, $484M ’23 ($1.17B in ’25 but that’s a bit of a wild card since it’s so far in the future…). That’s a 162% CAGR over 3 years and 113% CAGR over 5. They exceeded guidance in Q4’20 and in Q1’21 !!! Their forecast is also somewhat conservative since it excludes the impact of the pending bank charter acquisition which could increase these #’s. It also excludes some of the new offerings that were just announced like Auto Loans, and IPO investing (underwriting).
- Rapid revenue and customer growth! Forecast of $980M in 2021 to $2.1B in 2023 is a 29% CAGR over 3 years (28% CAGR over 5 years). 2.28M unique customers in Q1 and targeting 3M customers by the end of 2021. They have a great track record of upselling existing customers (very low cost to upsell vs. acquire) with about 1/4 of their customers using multiple products, this should only improve as they add more product lines (like auto loans…and hopefully options soon!)
- Galileo technology platform actually turns a major cost center into a profit center and makes them a true Fintech vs. just an online bank like Ally etc. Galileo is expected to grow 55% CAGR from 2020-2025 with an estimated 62% margin. This gives them a great B2B model and de-risks a 100% banking model. Galileo is the Fintech engine behind 70M accounts (Q1 #’s) and customers include Robinhood, Chime, Monzo, Revolt etc. Galileo’s APIs power functionalities including account set-up, funding, direct deposit, ACH transfer, IVR, early paycheck direct deposit, bill pay, transaction notifications, check balance, and point of sale authorization as well as dozens of other capabilities.
- Future bank charter with the pending acquisition of Golden Pacific Bancorp will help juice profitability and revenue growth and lowers their cost of capital. This is expected to grow profits from $484M in 2023 to $718M in 2023. If their estimates are correct AND the acquisition goes through that would increase the 3-year earnings CAGR from 162% up to 198%! This deal should close by the end of 2021
- Solid leadership: Anthony Noto, CEO has a strong background in Finance with Goldman Sachs and the NFL (CFO) AND Technology from Twitter (COO). Chris Lapointe, CFO also has a great mix of Tech (Uber) and finance from Goldman Sachs. Similar story with the rest of the executive team. Strong marketing with SoFi stadium in LA (Superbowl venue) and SoFi’s investment team is frequently on CNBC (Liz Young etc.)
- Rising interest rates is actually POSITIVE for SoFi! Banks pay customers a relatively low interest rate on short term deposits and charge customers a higher interest rate on longer term loans. As rates rise their margins increase. With rates at record lows, a rapidly recovering economy and inflation on the horizon rates should only go higher (maybe substantially and much faster than normal). The bank charter only enhances this….
- I invested a little in SoFi (via IPOE) originally after it pulled back and wanted to invest more BUT before I did, I opened accounts at SoFi to verify that it’s all that they say it is. So I opened a checking account, 2% cash back credit card, active investing account, automated investing account. This is the real deal: Products are SUPER competitive (2% cash back on a CC with NO annual fee!), Checking account pays 0.25% with no fees, $0 stock trades for active investing and direct access to IPOs (I participated in their 1st 4 IPOs today – 6/29) and no cost automated advisor investing. They really treat you like a “member” and customer service has been great so far. The mobile App is very user friendly with a ton of added features (credit score, education etc.).
- If you own SoFi stock for the long term and you’re not a customer yet – you’re doing yourself a disservice. You are an owner in the company and you should be profiting from your own banking! Try them – you’ll love them and start consolidating all your accounts to them like I am.
- Post lockup period (ended Monday 6/28) we should see a lot more interest from ETFs, Mutual Funds, Institutional investors and analysts. Volume should dissipate and the stock held its ground even with 50M shares trading a day (10X normal volume). There is a ton of demand for not only high growth but also PROFITABLE companies and FinTech specifically. Based on their market cap and projections for profitability they should be added to the Russell indexes next year and possibly the S&P Indexes if they can meet the profitability criteria etc.
Analyst Price Targets:
Oppenheimer: Overweight $30 Price Target
Rosenblatt = BUY $25 Price Target
I personally don’t follow Analysts too closely but it does drive institutional investor buying and helps give you a sanity check.
There are obvious risks if multiples come down or if they miss their targets and there is a very high short interest right now but so far they have delivered on all their guidance and growth.
I’ve seen a ton of posts on SoFi trading with a lot of hopes and dreams of a short squeeze or WSB pushing it higher and sure there’s a tiny chance that happens but that’s not why I put my money into SoFi.
Disclosure: I’m long SoFI and it’s my largest holding. I continue to buy more on dips and plan to add more in general as they meet their targets and goals, release new products.
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