Last week SoFi stock hit a new all-time low but instead of running for the hills
and selling everything I decided to double down and buy another $15,000 worth of SoFi
stock. So today let's break down my thought process behind this decision
and discuss everything that you will want to consider when deciding whether or not
you should invest in SoFi stock. Alright, let's jump right into it.
What is going on everyone I hope you are all having a fantastic day. So if you are
a SoFi investor or you just keep an eye on the stock then chances are you already know
that things haven't been going too well recently. To bring you up to speed, SoFi went public via an
SPAC merger of few months ago, topped out at around $25 per share in November of 2021 and
since then it plummeted over 60% falling below $8 per share just last week. Now throughout all this
chaos I have continued to be incredibly bullish on sofa stock and have made a number of videos along
the way documenting my thought process and plans going forward. But despite my best justification,
it seems like the stock continues to fall lower and lower but I just continue to buy more and more
so what's going on with SoFi stock, and is it time to sell everything and run for the hills? Well
first of all, obviously the stock market as a whole saw a pretty significant pullback this month
which is March of 2022 and SoFi was no exception to that… but there are a lot of other variables at
play here. For starters, the moratorium on student loans which is essentially the pausing of student
loan payments continues to get kicked further and further down the road by the federal government.
Now whether you agree or disagree with that decision is totally up to you but there is no
doubt that this has had an impact on SoFi’s top line and as a result an impact on their stock
price. Despite the fact that I personally talk about SoFi money and their investing tools most
often, it's no secret that student loan lending is a huge chunk of SoFi’s business specifically
on the refinancing side of things. But with federal rates paused and payments continually
being kicked further and further down the road by months at a time, very few people are refinancing
their student loans because why bother with this if your federal payments are currently paused and
you don't have to pay anything. It doesn't take some genius analysts to figure out how that would
impact SoFi but add on top of that the recent news from the Federal Reserve that they plan on raising
interest rates and this means that there is even less of a reason to refinance a loan right now.
When interest rates are low, it's typically a fantastic time to refinance and get a lower
interest rate on your different loans. But now that interest rates are set to go up and that is
likely to happen several times this year, the incentive to refinance at a lower interest rate
becomes smaller and smaller which only exacerbates the problem that I just talked about. All of this
has led major corporations like Morgan Stanley to significantly reduce their price targets for SoFi
and unfortunately when large companies with lots of analysts and resources become less bullish on a
stock, that does impact its price in some way, and then it is definitely played a role here as well.
But don't worry it is not all doom and gloom because, despite those few negative catalysts
that we just covered, the stock is really crashing for no reason considering their earnings last
quarter were better than expected and they have an incredibly strong earnings outlook for this
year as well. In fact, according to SoFi’s very own earnings outlook, they were expected
to 6X their EBITDA or earnings before interest, tax, depreciation, and amortization which is a
fancy financial metric used to measure a company's overall financial performance. Plus as I talked
about in a recent video, SoFi recently received their national banking charter, and with that came
some brand new features within SoFi money that now allows you to have separate checking and savings
accounts and an increased interest rate that is now at 1% and could go even higher as interest
rates continue to rise. And better products lead to more customers plus removing that middleman
with their partner banks will not only pass some of the savings onto the customer but obviously
improve SoFi’s bottom line as well. Perhaps the best sign in my opinion is the fact that SoFi’s
own CEO Anthony Noto has been buying a ton of SoFi stock over the past month and just since the
beginning of March has purchased over $700,000. Now some might say that it's concerning that a
high-level executive would not be purchasing even more of their own company's shares but in my eyes,
the only reason an executive would be buying more of their own company's stock is if they truly see
future potential growth within that company and that's about as close to insider trading as you
can get without actually being insider trading because I sure would hope that the CEO of a
company would have a good gauge of where the company is headed in the future. Circling back
to those new member statistics, in Q1 of 2019, SoFi was sitting at roughly 704,000 members.
Flashforward to Q4 of 2021 and they are now sitting at 3.4 million members. That's a
year-over-year growth of 87% and while they were growing at an even more rapid pace earlier in 2021
with a year over your growth of over 110%, that is still incredibly healthy and fast-paced growth
that is also sustainable in the long term. But what's led to this explosive growth and again
why is the stock not headed in the right direction if things are looking so good on paper. Well to me
I really think it's been their shift from solely lending products to a full-service
financial technology firm offering a wide array of financial products. As of Q4 of 2021, SoFi’s
financial service products actually outnumbered their lending products by a factor of 3.8 which
just two years ago was a factor of 0.5 meaning that financial service products now make up
a much larger portion of SoFi’s business in terms of members then there are lending products meaning
the continued moratorium on student loan lending and increase in interest rates it shouldn't have
as large of an impact on sofas new member numbers since many of their new members are coming for
products like SoFi invest, SoFi money, or SoFi Relay. This is all great news so it's very likely
that the significant drop last week in SoFi stock was due to the acquisition announcement
that so far intends to purchase Technysis for $1.1 billion in stock. Technysis essentially
develops core banking systems that help banks carry out they have day-to-day operations and
without boring you to death, SoFi actually expects this acquisition to generate between $500 to $800
million in additional revenue through the year 2025. Plus on top of that, they also expect this
to create roughly $80 million in savings between 2023 and 2025. So in the long term, this is very
likely going to be good for SoFi but a deal like this is very expensive and as a result, the stock
did slip below that $8 mark hitting an all-time low and has been rising steadily since then. So
what's my plan going forward and what should you be doing with your SoFi investment? Well,
first of all, I am not here to tell you what to do with your money. I just want to present you with
the facts, give you my perspective on things, and allow you to make an informed decision.
For me personally, I told you at the beginning of the video that I just purchased an additional
$15,000 of SoFi stock at a share price of $8.14 which at the time of recording
this video is already up over 20%. That being said keep in mind that I've been buying SoFi
stock for a long time… I bought it at over $20 per share, I bought it in the teens, and I dollar
cost averaged as it continued to drop lower and lower. So my average share price is now sitting at
$12.52 meaning I'm still way down on this position however this large purchase at such a low share
price did significantly lower my average price per share and I am still a firm believer that SoFi
stock is a rubber band that is pulled way back and is ready to be launched to the moon at any moment.
I've said that before and I've been wrong but all of the financial metrics point to a positive
future for SoFi and again the fact that the CEO himself has been buying hundreds of thousands of
dollars of SoFi stock is a pretty good sign in my opinion. But as always this is just
my thoughts on things and as we've already proven, I've been wrong before. So I'd love to know what
you think of all of this down in the comment section below and whether or not you plan on
buying more SoFi stock, getting in for the first time at this low price, or if you are selling
everything and running for the hills. If you did get value out of this content and you want to help
support me then be sure to check out some of my favorite financial tools down in the description
below including a link for SoFi where you can sign up and get some free cash when you do so.
Make sure you hit the like button, subscribe to the channel, and share this video with
someone who you think would get value out of this content as well. And of course, thank you so much
for your time I really do appreciate it so much take it easy and I'll see you in the next one!