Stock Picks | US Stock: SoFi - Profitable Now, Positive Outlook, What Do You Think?

25th Mar by Sanjay

9 comments 339 reads

SoFi Technologies (NSQ:SOFI) is now my biggest US Stock holding because:

They went profitable last quarter
Their outlook is positive
Their sponsorship deals mean they are getting more attention
Their institution holders are increasing
Their senior leadership team get rewards when their share price goes to $25, $35 and $45 - so more than 3 times current price
Recent convertible loan deal was over subscribed and conversion can only happen when price is > $12
This deal reduces interest costs for the company by $40-60m per annum

There is huge short interest (I think coming up to 20%) and once more quarters of positive earnings are announced - this should propel the share price.

What do you think?

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About the Author

Sanjay

Premium Member

9 comments

William K

25th Mar

Hi Sanjay. SoFi Technologies (NSQ:SOFI) is trading below its 200 day EMA. The 200 day EMA has started sloping downwards which is ominous. Its relative strength is negative. It's not yet profitable although the EPS is improving. Volume is decreasing. It has all the hallmarks of a laggard. Whilst there may be some good news in the pipeline, the market is clearly not interested in it. It won't be a good prospect until the price rises on volume and stays well above the 200 day EMA for a sustained period, and the 3 month relative strength is +10% instead of -31%. My inclination would be to avoid this one and look for something with a little more momentum - the US is in a strong bull market currently and there are hundreds of better options out there.

Sanjay

25th Mar

I thought the last quarter was its first profitable quarter - would be good if Stockopedia had quarterly view for US Stocks.

In terms of technicals and moving averages agree - but how do the massive shorts affect those figures?

In terms of other opportunities - I have plenty in index and themed ETFs (semiconductor one is going great guns) but do you other suggestions to look at?

William K

26th Mar

Sanjay. Agreed. It would be helpful if Stockopedia gave quarterly EPS. But the market seems to like evidence of a growing EPS over 5 years so it's not vital (although it's useful to know when the quarterly figures are coming out). Price corrections can be brutal if the market is disappointed with big gap downs so it's a good time to bag a decent profit if you're speculating).

The short interest on SoFi Technologies (NSQ:SOFI) on IG is 2% at present which is insignificant. But that's based on a sample of 50-250 which is too small for firm conclusions. As you suggest, massive short interest can backfire into a short squeeze (as happened to Tesla back in late 2020) with an exponential rise in share price. M inclination would be to have that confirmed by a sharp price rise for SoFi Technologies (NSQ:SOFI) to $10, say over 2-3 days, with volume.

Other suggestions? Like you, my current portfolio is heavily biased towards technology, especially semiconductors. Big technology will be a disruptive force for the rest of our lifetimes - subject to dips when interest rates are high, but a pretty solid long term punt. NVIDIA (NSQ:NVDA) has probably got some room for growth and could reach a $4 trillion valuation in a couple of years. Semiconductor ETFs are an excellent way of getting wide exposure, as you have observed. Of the smaller companies, I fancy Lam Research (NSQ:LRCX) and Palantir Technologies (NYQ:PLTR) - the latter being high risk but great growth potential. My current speculation outside technology is Cava (NYQ:CAVA) which is very high risk but which also has x10 multi bagger potential. Outside of technology, the best sector is healthcare and it's worth hunting around for the best ETF or one of the smaller companies (under say $20 billion) with high relative strength (>10% over 3 months), 5 years of EPS growth, and a Stockopedia momentum score of >90. I've just done a screen and there are plenty of possibles to choose from. All best wishes & good luck. William

Sanjay

26th Mar

Thanks for the insight.

In terms of short interest for SoFi Technologies (NSQ:SOFI) - as I understand it, the total short interest is nearly 15-20% (using Fintel https://fintel.io/ss/us/sofi).

Additionally, the last quarter earnings gave guidance of strong earnings growth (up to 2026) and now only better as they pay $40-60m less interest than they did when the guidance was made. Since then announced marketing deals with NBA etc so positive.

Will have a look at some of the stocks you mentioned.

William K

26th Mar

That's interesting. Thanks for the link - I haven't used fintel before for short info so that's a useful extra resource for me. At 16% short shares the shorters are putting themselves at risk of getting squeezed, which would be great for the share price. It could explain the very odd chart pattern where all the attempted peaks are snuffed out by a wave of selling. This might be a good one to buy on a genuine breakout. We shall see.

Rusty2

26th Mar

If you go into the Accounts > Income statement > Interims, then scroll down, they have quarterly EPS.

William K

26th Mar

Thanks Rusty2.

Sanjay

27th Mar

Nasdaq also publishes short interest information:
https://www.nasdaq.com/market-...

SoFi has currently 22% of shares shorted.

William K

27th Mar

Many thanks Sanjay

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US Stock: SoFi - Profitable now, Positive Outlook, What do you think?

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About the Author

Sanjay

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