We came across a bullish thesis on SoFi Technologies, Inc. (SOFI) on Value Degen’s Substack by Unemployed Value Degen. In this article we will summarize the bulls’ thesis on SOFI. SoFi Technologies, Inc. share was trading at $7.74 as of Sept 13th.
A customer at a teller’s desk, demonstrating the company’s financial services.
SoFi Technologies (SOFI) presents an intriguing investment opportunity despite being weighed down by negative sentiment due to its association with Cathie Wood and Chamath Palihapitiya. This fintech company aims to become a one-stop shop for digital financial services, boasting impressive user growth and a wide range of services. Although the market has recently cooled on SoFi, its fundamentals have significantly improved over the past two years, yet its stock price has lagged behind. SoFi’s customer base grew by 41% last year, adding 643,000 users in the most recent quarter, totaling 8.8 million users, of which 1 million have set SoFi as their primary bank. This sticky customer base is a strong asset, particularly in the highly regulated banking industry, where customers are reluctant to switch banks.
Revenue grew by 34% in 2023, but the company’s guidance for 2024 shows a slower growth rate of 17% to 19%, reflecting a more conservative outlook. Despite this, SoFi’s financials are robust, with trailing twelve-month revenue reaching $2.3 billion and a market capitalization of $7.8 billion. The fintech aspect of SoFi’s business is also on the rise, with non-loan segments like asset management and brokerage seeing significant growth. SoFi’s loan income now accounts for only 57% of total revenue, down from 90% two years ago, reflecting a successful diversification strategy.
One key area of excitement is SoFi’s mortgage origination segment, which is expected to benefit from falling interest rates, and could lower acquisition costs in line with competitors like Rocket Companies. Additionally, SoFi’s innovative approach to IPO participation for retail investors could prove timely, as capital markets seem poised for a potential IPO wave.
SoFi’s management is another strong point, with CEO Anthony Noto executing effectively and purchasing shares aggressively, signaling confidence in the company’s future. Despite challenges like stock-based compensation and insider selling, Noto’s leadership has steered SoFi toward profitability, achieved just three quarters ago. The company’s guidance for 2024 suggests growing tangible book value by $800 million to $1 billion, and at 1.35x tangible book, SoFi offers a potential 14.5% annual return even without multiple expansion. Given its current mispricing, SoFi’s strong performance and potential sentiment shift could lead to significant upside for investors.
SoFi Technologies, Inc. is also not on our list of the 31 Most Popular Stocks Among Hedge Funds. As per our database, 29 hedge fund portfolios held SOFI at the end of the second quarter which was 31 in the previous quarter. While we acknowledge the risk and potential of SOFI as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than SOFI but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article was originally published at Insider Monkey.