To The Moon

We have seen $SoFi Technologies Inc.(SOFI)$ experience some stock decline trading over the past few weeks after its earnings. I would like to review some of the factors that might affect the near-term performance of the stock.

I will also be sharing on how I will be using Technical Analysis to look at this stock after reviewing the factors, though some of the factors might pose some challenges to its stock price.

SoFi’s Future Direction

SOFI has given guidance that assumed lending revenue would be 92% to 95% of the year prior's level when they reported their second-quarter earnings in April. If we looked at the increase in capital levels from the recent transactions, but SOFI has not changed its direction on ramping up its loan growth.

This is one part that has make investors wonder why, if we have been following SOFI earnings guidance, we could see that while their internal indicators are healthy, the management wanted to seek out a more prudent approach with the personal loan growth amid less-upbeat external indicator data like the PCE, unemployment, consumer confidence, PPI and CPI, etc).

With stronger-than-expected Producer Price index (PPI) released yesterday (14 May 2024), I would say the result is mixed, and this has caused significant market reaction. If we were to look at how CPI (Consumer Price Index) has effect on SOFI, let us look at the Fed rate cut probabilities

Rate Cut Probabilities In July and September

If you looked at the probabilities for a July rate cut, it is quite low, we should be seeing rate remain unchanged. So this would mean we might be looking at less than 4 rate cuts.

So we saw almost 50% of rate cut probabilities in September, so this may be the first rate cut for 2024. SOFI should not be affected too much by whether there is either four or three rate cuts this year.

Sale of Delinquent Loans in Q1

What we need to focus is the sale of delinquent loans in 1Q to a loan buyer. SOFI is able to provide a clarity on that.

SoFi began as a lender focused on refinancing debt but now operates through three segments: lending, which includes student, personal, and home loans; financial services; and a technology platform.

So I would think SOFI would not be very much affected by how CPI moves, but rather how it does as a business and how investors think of its stock price.

Technical Analysis - 50-day MA period

The reason why I am interested to look at SOFI now, is because we are seeing SOFI touching the 50-day period finally after many session of trading below it.

If we look at the past pattern, we could see that SOFI is able to make an upward movement when that happen, for this, I am looking forward to upside movement from SOFI. I do have a position in SOFI, having DCA recently.

Technical Analysis - KDJ and MACD

If we looked closely at how SOFI has presented buying and selling opportunity, there seem to be a pattern of the number of periods.

The latest seen is on Monday (13 May 2024), where we saw crossover formed at KDJ and also seen similar pattern in MACD, and true enough, we saw an upside trading on 14 May 2024 (Tuesday). What would be interesting to find out is when would be the time to sell?

To use KDJ +MACD to determine that, we will need to look at the J value in KDJ, when it start to trend downwards. For MACD, when the MACD signal line is below.

Technical Analysis - Relative Strength Index (RSI)

SOFI RSI is still within the safe zone, even though we saw 74.92 million of shares traded, it is not near the overbought region. Hence, we need to see SOFI near the overbought, then we could see some traders and investors into the stock, pushing it for a Gap up.

Summary

Overall, I would think that SOFI management prudent approach to its loan growth is good, given that we are still unclear of how the rate cut decision for 2024 would be like.

And the economic data so far have point to a stickly inflation, so are we really going for higher and longer, meaning that rates will remain high for a while, at least to 3rd quarter?

I would think SOFI have potential for an upside, given that there should be profitable earnings in the current quarter.

Appreciate if you could share your thoughts in the comment section whether you think SOFI have more upside coming? Given that loan growth would continue as high rate might remain sticky for a while?

@TigerStars @Daily_Discussion @Tiger_Earnings @TigerWire appreciate if you could feature this article so that fellow tiger would benefit from my investing and trading thoughts.

Disclaimer: The analysis and result presented does not recommend or suggest any investing in the said stock. This is purely for Analysis.