To The Moon

$MoneyLion Inc.(ML)$ $SoFi Technologies Inc.(SOFI)$ Digital Bank Fintech SoFI or ML?

🌟💰💵 Digital Open Banking has the potential to revolutionize the way the world conducts banking. Though in its infancy it has started to change the ecosystem for good.

Around the world, Open Banking is rapidly transforming the way that financial institutions operate. It increases transparency and opens up to new product opportunities, with banks sharing information in a secure, standardized format to authorized organizations. With Fintech companies having been on the forefront of the Open Banking movement in the past, traditional institutions have begun to seize the opportunities created by Open Banking.

According to Boston Consulting Group, the financial services revenue from the global fintech sector could hit as high as $1.5 trillion – and when a market hits that size, investors should take notice. Wall Street’s analysts already have. Covering fintech from Needham, analyst Kyle Peterson has taken the measure of the industry – and he’s selected SoFi Technologies (NASDAQ:SOFI) and MoneyLion (NYSE:ML) as two of the best fintech stocks to buy.

We’ll start in San Francisco, arguably at the heart of the tech industry, with SoFi Technologies. The fintech’s very name defines what it does; it is derived from ‘Social Finance,’ and the company specializes in bringing the advantages of social media’s online interaction into the fintech industry. It’s a take on banking that’s fully modern and well adapted to the expanding role of digital tech in today’s world.

What SoFi has done, simply, is take banking fully online. The company is a licensed bank and provides its customers with the usual full range of banking services, everything from home and personal loans to credit cards and credit scoring to investment banking. SoFi can even facilitate refinancing on existing loan balances, from student, car, or home loans. The company boasts over 7.5 million current members who have earned $35 million-plus in rewards while paying off over $34 billion in debt.

SoFi is an online bank, and members access their accounts through the app, either by PC or mobile device. The company has made online security a priority and includes round-the-clock accounting monitoring among its service offerings, with alerts available to notify customers if there is any suspicious activity. The bank also falls under FDIC protections, with customer accounts insured up to the statutory $250,000.

Looking at results, we find that SoFi has been successful at the top line. The company’s revenues have shown consistent quarterly gains over the past several years, culminating in the last reported quarter, 4Q23, in which the top line came to $594.25 million for a 34% year-over-year gain. The quarterly revenue was $22.74 million better than had been anticipated. At the bottom line, SoFi’s Q4 showed a small non-GAAP net profit of 2 cents per share, beating the forecast by 2 cents.

For Needham analyst Peterson, the key here is SoFi’s ability to build itself as a ‘leading player’ in the shift to digital finance.

To this end, the Needham analyst puts a Buy rating on SOFI shares, with a $10 price target that indicates his confidence in a 35% upside on the one-year horizon. While the Needham view is bullish, the wider market stance here is less so. SOFI shares have a Hold consensus rating, based on 16 recent reviews that include a 4-8-4 split among Buy-Hold-Sell. Yet, the stock is selling for $7.40 and its $8.91 average target price suggests ~20% gain in the coming year.

Vanguard & Ark Invest Are Buying SOFI Stock however I’m bearish on this stock presently and will wait for a lower entry point of around $6.20.

Next up is MoneyLion, another fintech with a focus on personal banking. This company’s client services include lending, financial advisories, and investing options, all oriented toward the consumer market. MoneyLion has defined its target customer base as ‘the average American,’ that large slice of the US consumer population that lives from paycheck-to-paycheck, and can’t always access high-end financial services. MoneyLion streamlines the financial options available to these customers, to provide a winning combination of improved money management and improved credit-worthiness.

The customer base is growing, and growing fast. MoneyLion’s total of 14 million customers was reported in the 4Q23 financial release, and represents a 115% increase year-over-year. Revenues in the quarter came to $112.96 million, a gain of 19% year-over-year, and a modest $1.49 million better than the estimates. The company’s earnings came to a net loss, of $4.2 million for the quarter.

On a note of particular interest, MoneyLion’s full-year 2023 revenue was reported at $423.4 million, growing 24% y/y and reaching a company record for annual revenues.

Turning again to Needhan’s Peterson, we find the analyst laying out a simply bullish prospect for MoneyLion in his write-up on the stock. Peterson says of the company, “We believe that MoneyLion has developed a comprehensive personal financial services platform, with offerings that span banking, financial management, lending, and investing products. In addition, we like the scaling enterprise platform that we believe will provide additional growth opportunities and better match consumers with appropriate financial products. Finally, we like that profitability is improving consistently, which we believe sets the table for the shares to re-rate higher within the next 12 months.”

Peterson follows this up with a Buy rating and a $90 price target that implies a one-year gain of nearly 17% for the shares.

The broader view from his Wall Street peers is also upbeat. The stock has a unanimous Strong Buy consensus rating, based on 4 positive reviews, and the $95.50 average price target suggests a gain of ~25% from the current share price of $76.63.

I’m Bullish on ML and would look for an entry point of around $74.45 on Monday, April 8, 2024.

Citi was recognised by Global Finance Magazine as the World's Best Digital Bank for 2023. Which Digital bank will come out on top of the Global Finance ‘ best digital bank award, 2024’ award? We will need to wait until Q4 for the answer, what’s your choice?

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