To The Moon

$SoFi Technologies Inc.(SOFI)$ is scheduled to release its Q3 results on 29 October before market open. Investors would be focusing on SOFI’s outlook as we are seeing improving market conditions.

The consensus EPS Estimate is $0.04 and the consensus Revenue Estimate is $633.8M (+18.0% Y/Y).

Lending To Be Main Revenue Contributor In Upcoming Reporting Quarter

SoFi Technologies targets young, high-income individuals who may be underserved by traditional full-service banks. The company is purely digital and engages with its clients exclusively through its mobile app and website. Unlike existing digital banks, which generally have limited product offerings, SoFi offers a full suite of financial services and products including everything from student loans to estate planning.

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

One thing we need to be aware is how SoFi is able to keep the cost of revenue stable and low, this is important, but what could worries investors is the other expenses which cause the earnings to be not significant. So I would be looking out on how SoFi guidance play out.

But in recent quarters, the company has talked about financial services and tech stepping up a bit more, and that played out in the first half of this year. But if we looked at SoFi’s peer $LendingClub(LC)$ the focus have seem to be shifting back to lending.

LendingClub is a peer for SoFi for personal loan performance in terms of similar FICO scores and household income levels. Investors cheered, sending LendingClub stock up 11% Thursday, its largest one-day percentage increase since July. SoFi stock rose 4.9%.

The results bode well for SoFi, which reports earnings 29 Oct. Moreover, rate cuts, and the return of bank loan buyers, will benefit loan sale volume and economics,

On Monday (28 Oct), we saw SoFi gain 1.82% to close above 11 at 11.19. This year, shares have gained about 12%.

LendingClub's results "portray an improving credit picture." Mizuho raised its SoFi price target to $14 from $12 and reiterated an Outperform rating.

After several quarters of rising net charge-offs at LendingClub, the metric fell to 5.4% from 6.2% in the prior quarter. That matters because the company is a peer for SoFi for personal loan performance in terms of similar FICO scores and household income levels.

If we looked at the price history, we might be seeing a small correction after earnings, before SoFi make another upside movement, but I would think third quarter should see SoFi in profitable stage.

$2 billion deal for personal loans

Earlier this month, SoFi announced a $2 billion deal for personal loans with funds managed by affiliates of investment-manager Fortress Investment Group LLC.

SoFi mentioned in a news release that "The agreement will expand SoFi's capabilities in its loan-platform business, where the company refers prequalified borrowers to loan-origination partners as well as originates loans on behalf of third parties,"

This news have sit well with investors as we have seen SoFi shares gained 11% on 14 Oct on the day of the announcement, this mark the best one-day gain since January, Such a sizable deal seemed to hint that lending was becoming a growing trend in the fintech space's latest quarterly results,

No Significant Price Volatility In Past 3 Months

SOFI has not had significant price volatility in the past 3 months compared to the US market. The share price is stable.

SOFI's weekly volatility (7%) has been stable over the past year.

Shareholder Returns Exceeded US Market

If compared the return with the industry, SOFI underperformed the US Consumer Finance industry which returned 74.6% over the past year.

But if comparing return vs market, SOFI exceeded the US Market which returned 40.3% over the past year.

I believe with with the significant positive result from LendingClub, SoFi peer for personal loan performance in terms of similar FICO scores and household income levels, we should be seeing lending making a significant win.

Technical Analysis - MACD and MTF (Multi timeframe)

If we looked at how SoFi have been trading over the past few days, it is trading comfortably above the short-term and long-term MA, and we are also seeing an upside movement from the MACD.

This has also given the MTF a strong uptrend signal, with a possible win in lending from SoFi in its upcoming earnings, we could be looking at another upside, but outlook and guidance would be another key area to look at.

Summary

Looking at how SoFi pee, LendingClub have performed, I believe the volume of lending should be quite close for SoFi, but what investors need to look out is SoFi other expenses, if this could be managed well, we could be seeing a much better EPS and a surprise beat.

I am holding onto my position in SoFi, would consider to sell half my holdings at around $15-$16 if upside happen after its earnings.

Appreciate if you could share your thoughts in the comment section whether you think SoFi would surprise the market with a significant improvement in its EPS.

@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.