SoFi Technologies recently released mixed Q2 stats, putting stocks under pressure
The fintech group is expanding its platform, product offering and customer numbers
We are bullish on the long-term growth outlook for SOFI stocks, which could move towards $17.5 and then $20.0 in the coming weeks
Investors in financial technology (fintech) disruptor SoFi Technologies. (NASDAQ:) have had a volatile year so far in 2021. Year-to-date (YTD) SOFI shares are up nearly 22%. However, since the beginning of June, the stock has lost about 37% of its value.
Our readers will recall that SoFi Technologies went public through a reverse merger with Social Capital Hedosophia Corp, a special acquisition company (SPAC). . SOFI shares ended the day at $22.65. After trading between $20 and $25 for several weeks, the stock sold out in early June.
SOFI stock ended September 3 at $15.16. We should also remind readers that on February 1, prior to the close of the reverse merger, the stock hit an all-time high of $28.26. The market cap of SoFi Technologies is $12.12 billion. Investors debate whether now is a good time to invest in SOFI stocks. We are optimistic about the long-term growth prospects of SoFi Technologies. Here's why.
Long-Term Tailwinds
SoFi Technologies was founded in 2011 as a student loan refinancing company. Over the past decade, it has grown significantly into a fintech disruptor. The app enables consumers to manage, borrow, spend, save and invest money. For example, in May 2020 it acquired payment software company Galileo Financial Technologies, which helps companies develop payment, card and digital banking. Products. Also in March of this year, management announced that it had approved the purchase of California-based community bank Golden Pacific Bancorp, and "The proposed acquisition is an important strategic step in SoFi's path to achieving a national bank charter."
]On August 12, SOFI . Revenue was $231.1 million, an increase of 101% year-over-year (YOY). The company reports revenues in three segments: Loans (still the driving force behind revenue with a 71.9% share);
Financial Services (Q2 revenue was $17.0 million, compared to $2.4 million in Q2 2020);
Technology platform (consists mainly of Galileo, which has expanded its number of accounts to nearly 79 million from 36 million in the past year).
SOFI reported a net loss of $165.3 million for the second quarter of 2021, compared to a net profit of $7.8 million a year earlier. Adjusted EBITDA, however, was $11.2 million and was positive for the fourth consecutive quarter. It was also $35.0 million higher than in the second quarter of 2020.
On the results, CEO Anthony Noto noted:
"We have completed our 8th consecutive quarter of accelerated member growth, with even faster growth in cross-buying from existing members."
For the third quarter of 2021, management expects adjusted net sales of $245-$255 million, which was lower than what Wall Street had anticipated. SoFi Technologies also reiterated its full year 2021 expectation of adjusted net sales of $980 million and adjusted EBITDA of $27 million. SOFI shares push towards $13.50. However, buyers have since come in and pushed the stock back to $15, a level that acts as a support. That's why we have two analysts surveyed on Investing.com, both of whom are "buying" it. have assessed.
The stock's P/B ratio stands at 2.86x. In comparison, the P/B ratios of fintech enthusiasts PayPal (NASDAQ:) and Square (NYSE:) are 16.25x and 45.93x, respectively. Investors viewing technical charts are you may be interested to know that a rise towards the USD 17-$17.5 level is likely. In that case, the SOFI stock could potentially reach resistance around $17.5, after which it could trade sideways as it establishes a new base. Finally, as part of the short-term sentiment analysis, it would be important to look at the implied volatility (IV) levels for SoFi Technologies options, which typically show traders the market's view of possible moves in a security. . However, this statistic does not predict the direction of movement. SOFI's current implied volatility is 59.7, which is below the 20-day moving average of 67.4. This metric means that implied volatility is getting lower. While the current IV level may change, the market doesn't appear to be anticipating extreme jerkiness in the stock for the time being. While we expect the stock price to rise in the coming weeks, it is unlikely to be a straight move higher. There could even be a further drop towards $14 before another up leg starts. In the event of such a decline, potential investors in SoFi Technologies stock would then find better value in the stock.
4 Possible transactions
1. Buy SOFI Shares At Current Levels September 3, SOFI share closed at $15.16. Buy-and-hold investors should expect to hold this long position for several months as the stock may try, moving first towards $17.5 and then $20, leading to returns of over 30%.
However, investors who are concerned about large declines should consider placing a stop-loss about 3-5% below their entry point. Once the stock is firmly established around $20, it could potentially make another move towards the all-time high of $28.26. . However, such an increase could potentially take several quarters.
2. Sell ??a cash-secured put option on SOFI shares
Our second trade is a cash-secured put strategy. We've covered this option in numerous articles recently. Here's an example.
Bullish SoFi Technologies stock traders could now sell a Dec 17th put option, currently listed for $2.13.
Assuming traders would enter this put-sell strategy at the current price, the upside is that this $213 premium is maintained as long as SOFI shares close above $15, when the option expires. A total of $213 would be the maximum return on this trade (excluding trading fees and taxes).
The downside is if SoFi Technologies stock trades below $15.00 before maturity. Should that happen, traders can be allocated 100 shares for each put sold at a cost of $15.00 per share.
At maturity, this trade would break even at a share price of $12.87 (ie $15 – $2.13).
3. Buy an ETF with SoFi Technologies as a Shareholder
Many readers are familiar with the fact that we regularly hedge exchange-traded funds (ETFs) that may be suitable for buy-and-hold investors. Readers who don't want to invest capital in SOFI stocks but still want exposure to the stock may want to consider looking into a fund that the company owns.
However, as SoFi Technologies is a small and young company, it is not yet a leading holding in an ETF. This means that such an investment would provide only limited exposure to SOFI shares.
However, examples of ETFs with SOFI stocks are:
The De-SPAC ETF (NYSE:DSPC): This new fund has been roughly stable since its inception in May 2021. The weighting of the SOFI share is 3.85%;
JPMorgan BetaBuilders US Small Cap Equity ETF (NYSE:BBSC): Fund is up 17.2% YTD and SOFI stock weight is 0.38%;
First Trust US Equity Opportunities ETF (NYSE:): Fund is up 10.9% YTD and SOFI stock weight is 0.29%.
4. Buy shares in another fintech company
Potential investors interested in the fintech space may want to consider investing in other names in the sector as well. Several names that might appeal to readers are (in alphabetical order):
Bill.com (NYSE:): up 117.7% YTD;
Fiserv (NASDAQ:): Up 1.6% YTD;
Green Dot (NYSE:): Down 1.8% YTD;
JPMorgan Chase (NYSE:): Up 25.5% YTD;
Lemonade (NYSE:): Down 36.9% YTD;
Marqeta (NASDAQ:): 17.1% lower since June IPO;
MercadoLibre (NASDAQ:): Up 16.2% YTD;
PayPal: Up 23.4% YTD;
Silvergate Capital (NYSE:): Up 62.4% YTD;
Square: Up 23.9% YTD;
StoneCo (NASDAQ:): Down 46.8% YTD;
Visa (NYSE:): YTD up 2.9%.
As the above returns highlight, the fate of these companies in 2021 has varied considerably. Therefore, potential investors should research them carefully before putting capital into the stock. ]
Since its IPO in early June, SOFI stocks have been in the spotlight. While the record $28.26 price seen in February before the reverse merger was completed now seems a long way off, the company is likely to create more shareholder value in the coming months. Meanwhile, the company could even find a takeover candidate.
