Sofi: 2030 Target Share Price!
Undervalued Fintech, positioning for a rebound!
Sofi just reported stellar earnings, and it seems the market is finally beginning to reward this execution.
The stock is up 12% since the earnings.
However, the stock remains down 30% YTD, despite accelerating revenue growth and improving profitability.
Last, I published my review of the quarter explaining how the company continues to execute on its many objectives. Read that article if you would like to know more.
So when the fundamentals improve, but the stock price doesn’t, we must look at the prevailing market narratives to see why.
Here are the main narratives:
1. “It’s just a bank, bro”
2. Risky loans and the consumer is weak
3. Stock is down, so the bears are right
However, these narratives are just inaccurate.
Firstly, Sofi is not just a normal bank, it is a digital-first bank with the best tech stack out there. Legacy banks run on software from the 1990s, and this is not an exaggeration. Sofi can develop new products and service its customers much cheaper than competitors.
Secondly, the narrative that they make “bad loans to broke students” is nonsense. The weighted average income of a Sofi lending customer is $150K. The company is not exposed to a tsunami of bad loans as some bears claim. Moreover, the claim that the consumer is “done” is also nonsense. The US consumer is resilient, despite inflation and high oil prices. There hasn’t been any slowdown in demand.
Third, just because the stock is down, doesn’t mean that the bears are right.
“In the short run, the market is a voting machine, but in the long run, it is a weighing machine.” Benjamin Graham
Now investors have voted, and the stock is down because of fears regarding the US consumer and the Iran War inflation. But as more time goes on, investors begin to slowly realise that those concerns are overblown. I believe we are starting to see that happen with Sofi, with the stock up 18% from the lows.
This is why I have made Sofi one of my biggest positions and believe the company is significantly undervalued. This report will include.
Valuation Analysis
2030 Valuation Model
Margins
Dilution
EPS
Target Share Price
Let’s begin.
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