$SoFi is attacked by Wolves of Wall Street !
When I came across the Forbes’s post “Student Lender Sofi’s Growth Story Leaves Unanswered Questions“, I thought it would be another thought provoking read that will uncover more juicy secrets or a different viewpoint on US fintech stock $SoFi Technologies Inc.(SOFI)$.
By the time I read the last word, it was anything but.
The above picture and my post’s caption best sum up what I thought about the post.
Three Main Grouses:
Below are the 3 main discontentment the Forbes’s post have about SoFi.
(1) SoFi’s mixed results:
Forbes reported that SoFi, a consumer lending company, announced record revenues and customers gained in Q3 2023.
Net revenues climbed to $531 Million, up +27%, YoY.
New customers rose to 2.2 Million customers, a +47% increase.
Net interest income more than doubled after the San Francisco lender bought a bank that gave it access to insured deposits.
However, the digital bank also suffered a large net loss and a goodwill impairment charge related to its technology acquisitions.
This paper loss was not foreseen by equity analysts who cover the company.
(2) SoFi’s growth challenges:
Forbes cites analysts who doubt SoFi’s ability to grow its technology platform and financial services segments.
It has been confirmed that the Technology Platform section is not growing as fast as SoFi has forecasted during purchase.
Two factors that thwarted growth:
The unstable economy affecting people’s spending expenditure.
A change in sales strategy to focus on bigger partners with lots of customers to up demand for SoFi’s products, means the selling will take longer.
Both segments are expected to drive:
SoFi’s future profitability.
SoFi’s lending segment, that has been constrained by capital requirements and interest rate uncertainty.
(3) SoFi’s valuation concerns:
Forbes notes that SoFi’s stock price has been volatile.
Analysts have lowered their price targets, citing slower loan originations, lackluster technology revenue, and premium valuation.
SoFi 1 month’s price movement.
SoFi peaked on 27 Dec 2023 at $10.32 per share.
SoFi is still in the process of reaching a bottom.
My viewpoints: (mine & mine only)
1) For sure, Forbe’s post is not impartial and balanced. as it focuses mostly on the negative aspects of SoFi’s performance and outlook
2) It did not mention many of SoFi’s positive qualities:
Diversified product offerings.
Its loyal, growing and high-quality customer base.
Its innovation and expansion in the web3 space.
The benefits from the digital transformation of the financial industry.
3) The post relied heavily on the opinions of a few analysts who have a bearish stance on SoFi. Forbes has failed to provide a balanced perspective from other sources or experts.
4) Actually, the post seems to have a bias against banking stock & fintech stock company, as it compares SoFi unfavorably to traditional banks and other fintech companies without providing sufficient evidence or context.
5) In terms of SoFi’s financial earnings, Forbes failed to highlight that:
SoFi’s achieved positive adjusted EBITDA for 6 consecutive quarters.
For a relatively “young” financial institution, performance has been credible.
6) Overall consensus.
The tone in the post did not flicker a bit despite the overall analysts’ consensus remained “Optimistic”:
Buy recommendations - 7.
Hold recommendations - 13.
Sell recommendations - 2.
7) What is true though:
It is true that SoFi's revenue growth has slowed down from 90% in 2020 to 58% in 2021.
Net losses have increased from $66 million to $224 million in the same period.
It is hoped that any investors would realize that Year 2021 & 2022 were abnormalies brought about by the covid pandemic.
It did not help that beginning March 2022, the Fed has raised interest rates a total of 11 times (until July 2023) in a bid to curb inflation and in the process, the costs of doing business have increased by multiple folds.
With worldwide easing from the pandemic since 2022, every world economy is trying frantically to rebuild their economies and pick up from where they left off.
SoFi's student loan business has been affected by the Fed student loan payment pause. This has affected the bank’s interest income growth. The good news is that loan repayment has been reinstated since October 2023.
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Do you think SoFi is a digital bank worth keeping an eye out for?
Do you think not all traditional banking stocks will report a wonderful Q4 2023 earnings results; especially Investment banks like $Goldman Sachs(GS)$ and $Morgan Stanley(MS)$ when there weren’t any Multi-Billion dollars IPO in 2023.
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