SOFI camp: patience, grasshopper | InvestorPlace
- SoFi remains out of favor
- SoFi has only just begun to struggle as a bank
- It will take some time before winnings are reflected
SoFi Technologies (NASDAQ:SOFI) illustrates an important market principle. There is a season for each stock. And this is not the season for SOFI stock.
Hard times call for hard values. SoFi doesn’t have them. What it has is growth, hope and a plan. Wall Street doesn’t want that at the moment.
A long-term investor buys stocks when they’re not popular, either with cash or money from what’s popular. They will also turn off the noise and make time work for them, knowing that spring will eventually come.
It’s not easy when the market takes a pounding on a position like mine in SoFi. On March 21, shares struggled to reach $10. Some of mine cost up to $15. Bank of America (NYSE:BAK) downgraded the stock recently. MorganStanley (NYSE:WOMAN) did the same. Market dynamics says sell.
So why am I not selling?
Noto’s plan for SOFI shares
SoFi Technologies Chief Executive Officer (CEO) Anthony Noto has a plan that makes sense.
He turned SoFi into a real bank so it could take deposits and make its own loans. He offers his fintech technology acquired with Galileo to banks and brokers. He recently Technisys bought to get into the back office systems of the banks.
None of this is reflected in SoFi’s results yet. In 2021, SoFi lost $485 million, or $1.00 per share, with sales of $985 million. the Fourth quarter numbers beat estimates and provides shareholders with a short-term breather.
But the bang didn’t last. SoFi stays vulnerable to government policy on student loans, which make up one-third of the current loan portfolio. A slowing economy could mean losses in the personal loan portfolio.
The numbers were in there before SoFi has completed the acquisition of Golden Pacific BancorpThat is now SoFi Bank. Now that it has a California banking charter, it is meant to be a national bank based in Utah.
This will change SoFi’s numbers. It doesn’t have to resell new loans like it did before it became a bank. It will be able to offer savings and checking accounts. Already trying to buy shares with one Account with 1% interestmuch higher than typical high yield offers for review.
When do we make money?
SoFi will present the next results at the end of May. Another loss of 14 cents per share It is expected. No matter how attractive SoFi can look now, which means the stock isn’t going anywhere fast. If SoFi meets estimates, it won’t show any growth from the fourth quarter.
Analysts even turned around thumbs down to the Technisys deal. Shares are currently trading 10% below where they were prior to the announcement of this deal. Never mind that it lowers SoFi’s own costs. It doesn’t matter that it creates a new line of business. Never mind that SoFi can now sell its Galileo APIs to banks that already trust Technisys services.
The bottom line of SOFI stock
I continue to believe in SoFi stock. That doesn’t mean you should bet all your money on it. An investor shouldn’t bet all his money on anything.
But now it’s time to start piling up the unlovable. You can nibble on SoFi while keeping most of your money in what works, like Bank of America.
That’s how investing works. You buy good companies when they’re down and make time your ally. Speculators and the financial press will be running around in the coming months, buying oil when it’s high, commodities when they’re high, and snagging dividend stocks until yields hit the bottom.
With a balanced portfolio, you can already make money in these areas. When attention turns back to growth, your small position in SoFi will be ready.
At the time of publication, Dana Blankenhorn held a long position in SOFI and BAC. The opinions expressed in this article are those of the author and are governed by InvestorPlace.com Posting Policies.