New Target Price for SoFi as Shares Find a New Floor
The financial services firm looks technically sound and we could be in the early innings.
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Fans of TheStreet Pro's former "Stocks Under $10" portfolio product have had a lot to cheer about this year. Core holding Rocket Lab USA RKLB is up 294% year to date and Palantir Technologies PLTR is up 261% year to date. Rock on. Today, I am going to touch on one of our "laggards."
I touch on SoFi Technologies SOFI, which is up a mere 54% year to date at least once a month, so this will not come out of the blue, but we do have to do something about our target price. SOFI is actually up 155% since it's 2024 low in early August.
Remember Third Quarter Earnings
Financial Services generated total revenue of $84.165 million (+102%) as net interest income grew 66% and non-interest income grew 235%, as segment contribution margin improved from 3% to 42%. Lending generated total revenue of $396.245 million (+14%), as segment contribution margin improved from 58% to 60%. The Technology Platform generated total revenue of $102.91 million (+14%), as segment contribution margin improved from 32% to 36%.
Earnings
For the full fiscal year, SOFI projected adjusted net revenue of $2.535 billion to $2.55 billion, which was the previously-issued guidance range of $2.43 billion to $2.47 billion. This implied annual revenue growth of 22% to 23%, up from previously-issued guidance for growth of 17% to 19%. The Financial Services segment alone was now expected to grow revenue more than 80% year over year.
Full-year adjusted EBITDA was boosted to $640 million to $645 million, up from prior guidance of $605 million to $615 million. Full-year GAAP net income was upped to $204 million to $206 million, up from $175 million to $185 million as full-year GAAP EPS was nudged up to $0.11 to $0.12, up from $0.09 to $0.10.
SOFI will not report the firm's fourth quarter until the end of January, so it will be a while. Right now, the street is looking for GAAP EPS of $0.04 on revenue of roughly $678 million, which would be good for growth of 14% or so.
MarketGrader
Taking a look at a new tool I've been experimenting with known as "MarketGrader," it looks like SoFi Technologies grades out fundamentally at an A+ for growth and a B- for value. As far as sentiment indicators are concerned, it's solid grades across the board, an A+ for both relative strength and earnings guidance, an A for price momentum and a B for price trend. In fact, the stock gets a total sentiment score of 9.1 out of 10. This third-party tool helped me confirm what I have long felt about SOFI: that perhaps this party is still in the early innings.
Charts
Readers will see in this chart the same falling-wedge pattern and the same double-bottom reversal pattern that we showed you ahead of this wonderful run higher that the stock has enjoyed. The only difference is now, the reading for RSI is even wilder and the daily MACD is even more elevated. Overbought? News coming down the pike? Maybe Wall Street finally realized that CEO Anthony Noto was buying every dip over the past few years?
Now, take a look at this. Going back to the highs of 2021, we make use of a Fibonacci model to find that the "half-way back" point or 50% retracement of the peak to trough for the stock's entire existence would put the shares at $16.20. Fibonacci retracements of 61.8% or 78.6% would put the shares at either $19.10 or $23.20.
I still expect the shares to consolidate sometime soon, but that base, when it develops, should put a new floor under the stock price, technically.
SoFi Technologies (SOFI)
Target Price: $19 (high on Wall Street, and up from $13.50)
Pivot: $16.20 (half-way back point)
Add Some: Down to 50-day SMA (currently $10.30)
Panic: On a loss of both the 50-day and 200-day SMAs
At the time of publication, TheStreet Pro Portfolio was long SOFI equity.
