To The Moon

I have traded in SoFi Technologies (SOFI) before using swing trade. But now, after seeing that its price went up because of analyst adjust the target price yesterday, it make me wonder why is this stock behaving this way?

Let me share a few area that I look at to see if I shall buy SOFI for short term or long term?

Analyst Comments and Price Target

An analyst from Mizuho share some positive assessment for SoFi, I shall reiterate here, you can find it in Tiger News. What will be a concern to me is there will be a shifting of the funding macros, and in turn, investors might retreat from investing, hence, SoFi funding might drop.

What will happen when the funding drop, do they have enough cash flow to support their core business and the verticals?

Here is what Analyst has for the Price Target. The range of the Analyst price is between $6 to $11. The close price($7.25) on 15 Feb fall within this range. Is this price overvalued or undervalued?

Currently there are 9 BUY and 7 HOLD from the analyst recommendations. I would further examine their income and cash flow.

OP Income

Operating income is a company's profit after deducting operating expenses such as wages, depreciation, and cost of goods sold.

I will first look at their OP (operating) Income. This is important because the company might have a high revenue, but if their operating expenses is high, their operating income might be negative.

True enough, in the case of SOFI, it is having operating income since 2018 in the negative zone.

They have mentioned that they are on the way to Profitability, but it is not convincing from their financials yet.

Multiple Acquisition

They have done a couple of acquisitions over the year, so that they can offer more verticals to their existing customers and new ones. But are these really working for them?

SoFi was benefiting from lower cost of funding. But with the possibilities of a higher interest rate, cost of funding will not be as cheaper as the past 2 years. This might reduce their flexibility to capture net margins. And effectively optimize their returns.

We shall see less acquisition by SoFi as I do not think they will have easy access to funding to expand their verticals.

What will be a concern to me is there will be a shifting of the funding macros, and in turn, investors might retreat from investing, hence, SoFi funding might drop.

What will happen when the funding drop, do they have enough cash flow to support their core business and the verticals?

CFO (Cash flow from operating activities)

This indicates the amount of money a company brings in from its ongoing, regular business activities. From the chart, SoFi iCFO is negative for 2022. Are they bring in considerable amount of monies from their ongoing core businesses? Do they require to go for more funding, financing activities in order to continue operation to make money and turn profitable.

CFF (Cash flow from financing activities)

There is a good growth in 2022 for the cash flow from financing activities, but with the interest rate expected to go up, and funding and financing might shift to profitable companies.

Will SoFi still be attractive to investors, VCs, banks?

CFI (Cash flow from investing activities)

SoFi CFI is below zero mark, it has improved from 2018 till 2021. In 2022, it is showing in the negative zone, which mean they might be investing into assets that is not creating value. We will have to see whether they will come up with a master plan on how to turn profitable.

I believe profitable is critical because it would attract good funding and financing, and help them to grow faster.

Summary

Looking at the recent price increase for SoFi, it might look attractive, but maybe for short term. After looking at the few factor and indicators, I do not think I will be doing long term for SoFi.

I have run a prediction for SoFi for today (16 Feb). It is showing as a STRONG BUY signal. The price is trading very near resistance in pre-market at the time of this writing.

Sentiment Analysis Score for SoFi

The sentiment analysis score for SoFi look quite good, most days are in positive zone, only 15 Feb in the negative zone, but yet the price went up.

I maybe would take a swing trade tonight, but will monitor how the price and volume goes for SoFi when market open at 9.30am(US time).

@TigerStars appreciate your support! Thanks in advance for your support!

Do share your comments and like this post, if you find it useful in your trading plan or strategy.

Disclaimer: The analysis and result presented does not recommend or suggest any investing in the said stock. This is purely for Technical Analysis, and there are many other indicators that need to be look at together. (e.g., Price Action, Volume, etc.).