{"id":44139,"date":"2023-08-03T17:16:08","date_gmt":"2023-08-03T21:16:08","guid":{"rendered":"https:\/\/ifintechworld.com\/markets\/up-124-in-2023-sofi-stock-is-caught-between-bulls-and-bears\/"},"modified":"2023-08-03T17:16:10","modified_gmt":"2023-08-03T21:16:10","slug":"up-124-in-2023-sofi-stock-is-caught-between-bulls-and-bears","status":"publish","type":"post","link":"https:\/\/ifintechworld.com\/?p=44139","title":{"rendered":"Up 124% In 2023, SoFi Stock Is Caught Between Bulls And Bears"},"content":{"rendered":"<div>\n<p>As a shareholder of San Francisco-based fintech, SoFi Technologies, I am disappointed its stock trades 57% below the high it reached in June 2021 \u2013 the day it went public by merging with a Special Purpose Acquisition Company.<\/p>\n<p>Yet the news is not all bad. Its shares have done well in 2023 \u2013 up 124% through August 2. What\u2019s more, SoFi reported expectations-beating second quarter results and boosted its forecast.<\/p>\n<p>With 14.4% of SoFi shares sold short, according to the Wall Street Journal, the battle rages on between the bears, \u2013 who view SoFi stock as overvalued, and bulls like me, who cite its ability to beat growth expectations, its path to profitability, its declining expenses, and its improving credit quality.<\/p>\n<h2 class=\"subhead-embed color-accent bg-base font-accent font-size text-align\">SoFi\u2019s Second Quarter Financial Report<\/h2>\n<p>In the latest company report, released on July 31, SoFi beat expectations and raised guidance when it reported second quarter results.<\/p>\n<p><fbs-ad position=\"inread\" progressive=\"\" ad-id=\"article-0-inread\" aria-hidden=\"true\" role=\"presentation\"><\/fbs-ad><\/p>\n<p>SoFi operates in three business segments: lending; financial services, like services for checking, and savings, investment, and credit cards; and technology platform, a digital payments service.<\/p>\n<p>Here are SoFi\u2019s key Q2 numbers:<\/p>\n<ul>\n<li><strong>Revenue: $498 million.<\/strong> This was 37% more than the year before and $22 million higher than analyst expectations, according to Reuters. SoFi\u2019s growth rate exceeds the 2022 to 2027 Statista fintech industry forecast of 19.4% compound annual growth.<\/li>\n<li><strong>Personal-loan originations: $3.7 billion.<\/strong> This is a 51% increase from the year before and the loans sport a weighted average coupon rate of 13.6%, according to the Wall Street Journal.<\/li>\n<li><strong>Net interest income: $291.1 million.<\/strong> This more than doubled the previous year\u2019s figure and beat expectations by $30 million, noted<em> <\/em>Reuters.<\/li>\n<li><strong>Net interest margin: 5.74%<\/strong> \u2013 exceeds its peer-group average, thanks to the spread between its double-digit loan interest rates and its consumer deposits, which pay interest at rates from 0.5% to 4.4%, the<em> <\/em>Journal<em> <\/em>reported.<\/li>\n<li><strong>Net loss: $47.5 million.<\/strong> SoFi said it expects to report a profit in the fourth quarter of 2023, Reuters wrote.<\/li>\n<li><strong>Total deposits: $12.7 billion<\/strong> \u2013 up 26% \u2013 more than a billion dollars more than what analysts expected, according to Visible Alpha.<\/li>\n<li><strong>Total customers: more than 6.2 million<\/strong> \u2013 up 44%, according to the Journal.<\/li>\n<\/ul>\n<p>SoFi also increased its outlook for the third quarter by 22%. According to MarketWatch, SoFi raised its adjusted earnings before interest, taxes, depreciation and amortization to a range between $333 million to $343 million. The midpoint of this range \u2013 $338 million \u2013 is 21.6% above $278 million \u2013 the midpoint of its earlier adjusted EBITDA forecast.<\/p>\n<h2 class=\"subhead-embed color-accent bg-base font-accent font-size text-align\">SoFi\u2019s Bear Case<\/h2>\n<p>The case against SoFi\u2019s stock hinges on two arguments:<\/p>\n<ul>\n<li><strong>Its shares are overvalued. <\/strong>Analysts see SoFi\u2019s stock price as excessive because they do not think it can achieve its profitability forecasts. Specifically, at 30 times its EBIDTA forecast, Keefe, Bruyette &amp; Woods analyst Michael Perito wrote SoFi\u2019s valuation \u201chas overshot the fundamental earnings outlook. \u201d He expects the fintech\u2019s 2023 profitability to be only \u201cmodest at best.\u201d He views growth as likely to moderate which would crimp SoFi\u2019s capital consumption, MarketWatch<em> <\/em>reported. In mid-July, Morgan Stanley<fbs-ticker data-name=\"MS\" data-href=\"https:\/\/www.forbes.com\/companies\/morgan-stanley\" data-type=\"stock\"><br \/>\n   MS<br \/>\n  <\/fbs-ticker> wrote SoFi should trade at one times price-to-book rather than its current 2.1 times 2024 tangible book value per share. Morgan Stanley noted SoFi\u2019s current valuation assumes a 20% return on average tangible common equity \u2013 whereas the analyst sees 15% as a more realistic estimate, according to Barron\u2019s.<\/li>\n<li><strong>Its growth is slowing. <\/strong>Moreover, Morgan Stanley doubts SoFi can sustain its high growth rate \u2013 on which SoFi\u2019s stock price depends. Jeffrey Adelson of Morgan Stanley set a $7 price target for SoFi, arguing its \u201cvaluation looks expensive with execution risks into 2024 as growth slows [and] rates stay higher for longer,\u201d MarketWatch noted.<\/li>\n<\/ul>\n<h2 class=\"subhead-embed color-accent bg-base font-accent font-size text-align\">SoFi\u2019s Bull Case<\/h2>\n<p>Bullish views regarding SoFi\u2019s future hinge on three observations:<\/p>\n<ul>\n<li><strong>SoFi should not be compared to banks because it is gaining market share with strategies banks cannot replicate.<\/strong> Andrew Jeffrey of Truist Securities wrote in a note to clients, SoFi is winning new depositors quickly and speeding up loan decision-making in ways legacy banks do not currently and may not be able to copy in the future.<\/li>\n<li><strong>Clear path to profitability. <\/strong>Keefe, Bruyette &amp; Woods analyst Michael Perito wrote, \u201cWhile the stock is near technical highs, the raised guidance and stronger margins (particularly in the financial services segment) present a clearer path towards profitability\u201d by the end of the year.<\/li>\n<li><strong>Lower expense growth.<\/strong> Morningstar<fbs-ticker data-name=\"MORN\" data-href=\"https:\/\/www.forbes.com\/companies\/morningstar\" data-type=\"stock\"><br \/>\n   MORN<br \/>\n  <\/fbs-ticker> boosted its target price by $0.50 for SoFi to $14.50, noting, \u201croughly half of that increase reflects the time value of money since our last update, while the remainder is due to lower near-term expense growth projections, as we now expect SoFi to be profitable during 2024.\u201d<\/li>\n<\/ul>\n<h2 class=\"subhead-embed color-accent bg-base font-accent font-size text-align\">Where Will SoFi Stock Go Next?<\/h2>\n<p>SoFi\u2019s stock looks slightly overvalued based on a 12-month price target of $9.66 from 18 Wall Street analysts, according to TipRanks.<\/p>\n<p>Mizuho analyst, Dan Dolev wrote SoFi\u2019s FSPL will encourage \u201cuser engagement, nurturing a flywheel effect of more users taking advantage of SoFi&#8217;s multiple services driving additional growth.\u201d He expects this flywheel to create \u2018operating leverage\u2019 as revenues grow \u2014 ultimately \u201cshrinking losses and&#8230;delivering profits.\u201d<\/p>\n<p>SoFi\u2019s stock price depends on whether it exceeds expectations. If it falls short of the expectations it raised July 31, the SoFi bears will prevail. Only time will tell.<\/p>\n<p><strong><em>Disclosure: <\/em><\/strong><em>I own shares in SoFi Technologies \u2013 starting as an angel investor in 2014.<\/em><\/p>\n<\/div>\n<p>Read the full article <a href=\"https:\/\/www.forbes.com\/sites\/petercohan\/2023\/08\/03\/up-124-in-2023-sofi-stock-is-caught-between-bulls-and-bears\/\" target=\"_blank\" rel=\"noopener\">here<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"<p>As a shareholder of San Francisco-based fintech, SoFi Technologies, I am disappointed its stock trades 57% below the high it reached in June 2021 \u2013 the day it went public by merging with a Special Purpose Acquisition Company. Yet the news is not all bad. Its shares have done well in 2023 \u2013 up 124% [&hellip;]<\/p>\n","protected":false},"author":1,"featured_media":44140,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[241],"tags":[83],"class_list":["post-44139","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-markets","tag-featured"],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v20.6 - https:\/\/yoast.com\/wordpress\/plugins\/seo\/ -->\n<title>Up 124% In 2023, SoFi Stock Is Caught Between Bulls And Bears | iFintechWorld<\/title>\n<meta name=\"description\" content=\"As a shareholder of San Francisco-based fintech, SoFi Technologies, I am disappointed its stock trades 57% below the high it reached in June 2021 \u2013 the\" \/>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" 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