$SoFi so good. Buy before earnings out on 29 Jan?
Looking back.
Back in 03 Nov 2022, I have shared a post on $SoFi Technologies Inc.(SOFI)$, from its humble beginnings until its transformation into a full fledged banking institution.
If you are interested in SoFi’s basics, click here ! to savour.
After a “long” absence, time is ripe for a quick catch up and refresh.
Year to date performance.
SoFi had put up quite a performance in 2023, in spite of the additional 4 more 2023 interest hikes.
its YTD performance registered a +77.92% gain.
It is still off its “three peaks” achieved in 2021 (hovering around $20+ range) when US market was a washed with excess liquidity.
January 2024 performance.
One week into 2024, based on data provided by S&P Global Market Intelligence, SoFi stock price has fallen by -16.6%.
This came about after, after a noted Wall Street analyst downgraded the banking and fintech services stocks across the board.
On Wed, 03 Jan 2024, Keefe, Bruyette & Woods analyst Mike Perito downgraded SoFi to underperform from market perform.
At the same time, he also lowered his price target (on SoFi) from $7.50 to $6.50 per share.
Perito’s justifications:
The Bruyette & Woods analyst noted that:
SoFi shares had rallied > 40% on the heels of its stellar Q3 2023 earnings in early November 2023.
He is concerned that falling interest rates in 2024 and 2025 could weigh on SoFi's earnings.
Given SoFi’s use of fair-value accounting -- particularly as it pertains to the reported value in any given quarter of the unsecured personal loans SoFi holds on its balance sheet.
He estimates for every 0.25% reduction in the Federal funds rate this year, SoFi's reported revenue could be impacted by around $50 million, or around $0.05 per share in earnings.
What's next for SoFi investors?
In the post, dated 30 Jul 2023, Steve Symington highlighted 2 items.
(1) The Fed's rate hikes served to accelerate SoFi's growth and path to profitability.
This is because as a mobile-centric fintech with a banking license, SoFi enjoys immense competitive advantages over early fintechs and larger banks (eg. $JPMorgan Chase(JPM)$, $Wells Fargo(WFC)$ , $Citigroup(C)$ etc…) in the banking space.
(2) SoFi, CEO, Anthony Noto comments detailed that:
With the help of its national bank charter
With SoFi’s superior cost structure compared to traditional banks.
SoFi will also be able to hold its own rates much longer and higher than competitors even as the federal funds rate begins to decline.
This means yield-hungry members (ahem! banking customers) will continue flocking to SoFi's banking offerings, and the greater operating leverage SoFi can drive through its superior cost structure.
Profitable Q4 2023 earnings?
SoFi Management predicts its first GAAP profit in its next quarterly earnings (slated for 29 Jan 2024) reporting.
Should investors begin to accumulate before Q4 earnings report is out?
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Do you think the Fed will begin to cut interest rate anytime soon?
Do you think SoFi will report a profit in their coming Q4 2023 earnings?
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