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2022-05-13

Therefore, we revise our rating on SOFI stock from Hold to Sell.

Is SoFi Stock A Buy, Sell, Or Hold After Recent Earnings? Sell Before It's Too Late

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Sell Before It's Too Late","url":"https://stock-news.laohu8.com/highlight/detail?id=1178747002","media":"seekingalpha","summary":"SummarySoFi raised its revenue outlook for FY22, as it didn't assume a recession. But we believe man","content":"<html><head></head><body>Summary<ul><li>SoFi raised its revenue outlook for FY22, as it didn&#39;t assume a recession. But we believe management is overly optimistic, and investors&#39; hard-earned money could be at further risk.</li><li>The market has been pricing in significant macro headwinds for financial stocks. Therefore, we are surprised that management didn&#39;t model a recession in its base case.</li><li>We discuss why we sold out of SOFI stock in our previous article. We now urge investors to sell before it&#39;s too late.</li><li>Therefore, we revise our rating on SOFI stock from Hold to Sell. Use any rallies to cut exposure partially or fully.</li></ul><img src=\"https://static.tigerbbs.com/25c5010d891d12ec43c4a9f942b97485\" tg-width=\"1080\" tg-height=\"720\" width=\"100%\" height=\"auto\"/>Justin Sullivan/Getty Images NewsInvestment ThesisIn our previous SoFi Technologies, Inc. (NASDAQ:SOFI) article (Hold rating, down 39%), we highlighted that we have gotten out of SOFI stock and are unlikely to return. After SoFi&#39;s FQ1 earnings release, it corroboratedour belief that SOFI will have significant challenges reaching profitability. Management is too optimistic in its projections amid an avalanche in FinTech stocks. It highlighted that it didn&#39;t model a recession, which is in sharp contrast to the recent earnings call of some of its peers.For instance, Upstart (UPST) emphasized: &#34;Interest rates have continued to climb in response to inflation signals and Fed tightening. The combination of inflation and monetary tightening imply the nontrivial risk of a recession potentially later this year.&#34; Furthermore, Rocket Companies (RKT) CEO Jay Farner accentuated:<blockquote>As people take on higher mortgage interest rates, that means that in the future, we&#39;ll be refinancing our clients the millions and millions that we&#39;re putting on our platform to lower interest rates because we feel strongly that there&#39;ll be a recession coming here in the coming quarters. -Yahoo Finance</blockquote>Therefore, we think SoFi may have overestimated the extent of its recent growth trajectory, which has clearly been slowing down. Given its highly unprofitable business model, we believe the sell-off may not be done. We also have not observed a forced capitulation in its price action, which could portend a potential bottom.Consequently, we revise our rating on SOFI stock from Hold to Sell. We urge investors to sell and never look back.What To Expect After Earnings?<img src=\"https://static.tigerbbs.com/770db66262e6d36176f58a7a8678e07e\" tg-width=\"640\" tg-height=\"396\" width=\"100%\" height=\"auto\"/>SoFi normalized net margins % (S&amp;P Capital IQ)Like many other unprofitable companies, SoFi prefers to use adjusted revenue and profitability metrics to spruce up its P&amp;L. But we urge investors to ignore what&#39;s presented by management and focus on what really matters: GAAP profitability.Despite its massive topline growth in 2021, its revenue growth has slowed down markedly. Notably, it has also impacted its ability to improve its net margins, as seen above. SoFi delivered a net margin of -21.6% in FQ1, albeit up from FQ4&#39;s -23.7%. However, SoFi&#39;s business model is still deeply unprofitable despite the improvement.Furthermore, management revised its revenue guidance for Q2 but raised FY22&#39;s guidance above the consensus estimates. But we thought the raised FY22 guidance was antithetical to the reduced forecasts by some of its peers.Due to the increased macro stress and headwinds facing financial companies, their projections were downgraded. Therefore, the market has been pricing in an increased likelihood of a recession. Given SoFi stock&#39;s premium valuation and unprofitability, we believe SoFi&#39;s high-growth cadence could be at risk. Furthermore, we are surprised that management didn&#39;t model a potential recession in its base case. CEO Anthony Noto articulated (edited):<blockquote>We are not assuming a recession. We do have early warning frameworks that will allow us to get in front of some type of deterioration in the economy that&#39;s of the magnitude that would have an impact on the life of loan losses. We&#39;ve been doing this for a couple of years. And so we&#39;ll be vigilant on that front. But right now, those indicators are showing relatively strong demand and a relatively stable economic environment. And the performance of our credit has been quite positive. (SoFi&#39;s FQ1&#39;22 earnings call)</blockquote>What Is SoFi&#39;s Future Outlook?<img src=\"https://static.tigerbbs.com/59ec22d0a55c63350b2e38a07b167408\" tg-width=\"798\" tg-height=\"494\" width=\"100%\" height=\"auto\"/>SoFi members count (Company filings)<img src=\"https://static.tigerbbs.com/d8cf028125fc250cd527956ca8a6cae7\" tg-width=\"640\" tg-height=\"396\" width=\"100%\" height=\"auto\"/>SoFi revenue and net income per member $ (S&amp;P Capital IQ)We believe that SoFi could miss its guidance for FY22 and maybe even for FY23, given the significant macro headwinds and over-optimism. SoFi confidently raised its FY22 revenue guidance as it didn&#39;t expect a recession. However, the market has been pricing in a recession, impacting the overall market and financial stocks.Furthermore, its members&#39; growth cadence has also been slowing down. Moreover, we believe that its growth trajectory could moderate further as the recessionary signals become more evident over the next six to nine months. In addition, we also noted that SoFi&#39;s revenue and net income per member have remained relatively stagnant despite its massive growth. Therefore, SoFi&#39;s aggressive strategy in acquiring users has not translated to user economics meaningfully that could help move it nearer to GAAP profitability. It&#39;s a worrying sign, especially if members&#39; growth is expected to moderate further.Is SOFI Stock A Buy, Sell, Or Hold?<img src=\"https://static.tigerbbs.com/eae4dea7c4a1594fa50fa8fb4f47fa59\" tg-width=\"640\" tg-height=\"384\" width=\"100%\" height=\"auto\"/>SOFI stock NTM normalized P/E (TIKR)<img src=\"https://static.tigerbbs.com/aa838e37db6960d76824623d1c90431c\" tg-width=\"640\" tg-height=\"356\" width=\"100%\" height=\"auto\"/>SOFI stock price chart (TradingView)With an NTM normalized P/E of -17.65x, we urge investors to sell and never return. Moreover, we believe that its earnings profile could worsen in the next few quarters as macro stresses increase, impacting its revenue and profitability further.Furthermore, SOFI&#39;s stock dropped below a critical support level in early April, which has increased the bearish momentum in the stock. We also have not observed a forced capitulation price action to prelude a potential bottoming process. In other words, panic-selling has yet to set in.As a result,we revise our rating on SOFI stock from Hold to Sell. Leave, and never return.</body></html>","source":"seekingalpha","collect":0,"html":"<!DOCTYPE html>\n<html>\n<head>\n<meta http-equiv=\"Content-Type\" content=\"text/html; charset=utf-8\" />\n<meta name=\"viewport\" content=\"width=device-width,initial-scale=1.0,minimum-scale=1.0,maximum-scale=1.0,user-scalable=no\"/>\n<meta name=\"format-detection\" content=\"telephone=no,email=no,address=no\" />\n<title>Is SoFi Stock A Buy, Sell, Or Hold After Recent Earnings? 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Sell Before It's Too Late\n</h2>\n\n<h4 class=\"meta\">\n\n\n2022-05-13 10:02 GMT+8&nbsp;&nbsp;&nbsp;<a href=https://seekingalpha.com/article/4510609-sofi-stock-buy-sell-hold>seekingalpha</a>\n\n\n</h4>\n\n</header>\n<article>\n<div>\nSummarySoFi raised its revenue outlook for FY22, as it didn't assume a recession. But we believe management is overly optimistic, and investors' hard-earned money could be at further risk.The market ...\n\n<a href=\"https://seekingalpha.com/article/4510609-sofi-stock-buy-sell-hold\">Web Link</a>\n\n</div>\n\n\n</article>\n</div>\n</body>\n</html>\n","type":0,"thumbnail":"","relate_stocks":{"SOFI":"SoFi Technologies Inc."},"source_url":"https://seekingalpha.com/article/4510609-sofi-stock-buy-sell-hold","is_english":true,"share_image_url":"https://static.laohu8.com/5a36db9d73b4222bc376d24ccc48c8a4","article_id":"1178747002","content_text":"SummarySoFi raised its revenue outlook for FY22, as it didn't assume a recession. But we believe management is overly optimistic, and investors' hard-earned money could be at further risk.The market has been pricing in significant macro headwinds for financial stocks. Therefore, we are surprised that management didn't model a recession in its base case.We discuss why we sold out of SOFI stock in our previous article. We now urge investors to sell before it's too late.Therefore, we revise our rating on SOFI stock from Hold to Sell. Use any rallies to cut exposure partially or fully.Justin Sullivan/Getty Images NewsInvestment ThesisIn our previous SoFi Technologies, Inc. (NASDAQ:SOFI) article (Hold rating, down 39%), we highlighted that we have gotten out of SOFI stock and are unlikely to return. After SoFi's FQ1 earnings release, it corroboratedour belief that SOFI will have significant challenges reaching profitability. Management is too optimistic in its projections amid an avalanche in FinTech stocks. It highlighted that it didn't model a recession, which is in sharp contrast to the recent earnings call of some of its peers.For instance, Upstart (UPST) emphasized: \"Interest rates have continued to climb in response to inflation signals and Fed tightening. The combination of inflation and monetary tightening imply the nontrivial risk of a recession potentially later this year.\" Furthermore, Rocket Companies (RKT) CEO Jay Farner accentuated:As people take on higher mortgage interest rates, that means that in the future, we'll be refinancing our clients the millions and millions that we're putting on our platform to lower interest rates because we feel strongly that there'll be a recession coming here in the coming quarters. -Yahoo FinanceTherefore, we think SoFi may have overestimated the extent of its recent growth trajectory, which has clearly been slowing down. Given its highly unprofitable business model, we believe the sell-off may not be done. We also have not observed a forced capitulation in its price action, which could portend a potential bottom.Consequently, we revise our rating on SOFI stock from Hold to Sell. We urge investors to sell and never look back.What To Expect After Earnings?SoFi normalized net margins % (S&P Capital IQ)Like many other unprofitable companies, SoFi prefers to use adjusted revenue and profitability metrics to spruce up its P&L. But we urge investors to ignore what's presented by management and focus on what really matters: GAAP profitability.Despite its massive topline growth in 2021, its revenue growth has slowed down markedly. Notably, it has also impacted its ability to improve its net margins, as seen above. SoFi delivered a net margin of -21.6% in FQ1, albeit up from FQ4's -23.7%. However, SoFi's business model is still deeply unprofitable despite the improvement.Furthermore, management revised its revenue guidance for Q2 but raised FY22's guidance above the consensus estimates. But we thought the raised FY22 guidance was antithetical to the reduced forecasts by some of its peers.Due to the increased macro stress and headwinds facing financial companies, their projections were downgraded. Therefore, the market has been pricing in an increased likelihood of a recession. Given SoFi stock's premium valuation and unprofitability, we believe SoFi's high-growth cadence could be at risk. Furthermore, we are surprised that management didn't model a potential recession in its base case. CEO Anthony Noto articulated (edited):We are not assuming a recession. We do have early warning frameworks that will allow us to get in front of some type of deterioration in the economy that's of the magnitude that would have an impact on the life of loan losses. We've been doing this for a couple of years. And so we'll be vigilant on that front. But right now, those indicators are showing relatively strong demand and a relatively stable economic environment. And the performance of our credit has been quite positive. (SoFi's FQ1'22 earnings call)What Is SoFi's Future Outlook?SoFi members count (Company filings)SoFi revenue and net income per member $ (S&P Capital IQ)We believe that SoFi could miss its guidance for FY22 and maybe even for FY23, given the significant macro headwinds and over-optimism. SoFi confidently raised its FY22 revenue guidance as it didn't expect a recession. However, the market has been pricing in a recession, impacting the overall market and financial stocks.Furthermore, its members' growth cadence has also been slowing down. Moreover, we believe that its growth trajectory could moderate further as the recessionary signals become more evident over the next six to nine months. In addition, we also noted that SoFi's revenue and net income per member have remained relatively stagnant despite its massive growth. Therefore, SoFi's aggressive strategy in acquiring users has not translated to user economics meaningfully that could help move it nearer to GAAP profitability. It's a worrying sign, especially if members' growth is expected to moderate further.Is SOFI Stock A Buy, Sell, Or Hold?SOFI stock NTM normalized P/E (TIKR)SOFI stock price chart (TradingView)With an NTM normalized P/E of -17.65x, we urge investors to sell and never return. Moreover, we believe that its earnings profile could worsen in the next few quarters as macro stresses increase, impacting its revenue and profitability further.Furthermore, SOFI's stock dropped below a critical support level in early April, which has increased the bearish momentum in the stock. We also have not observed a forced capitulation price action to prelude a potential bottoming process. In other words, panic-selling has yet to set in.As a result,we revise our rating on SOFI stock from Hold to Sell. Leave, and never return.","news_type":1},"isVote":1,"tweetType":1,"viewCount":327,"commentLimit":10,"likeStatus":false,"favoriteStatus":false,"reportStatus":false,"symbols":[],"verified":2,"subType":0,"readableState":1,"langContent":"CN","currentLanguage":"CN","warmUpFlag":false,"orderFlag":false,"shareable":true,"causeOfNotShareable":"","featuresForAnalytics":[],"commentAndTweetFlag":false,"andRepostAutoSelectedFlag":false,"upFlag":false,"length":53,"xxTargetLangEnum":"ZH_CN"},"commentList":[],"isCommentEnd":true,"isTiger":false,"isWeiXinMini":false,"url":"/m/post/612567262"}