SOFI - Review
Disclaimer
- I presently have a small position in SOFI - I am down 33% roughly on this position.
- My position is small, and it was started with the purpose in mind to build the position slowly over time, should SOFI keep going down.
- I am only sharing my thoughts on the company, you are responsible for your own buying and selling decisions.
- A drop below 10.15 can cause significant downfall in the price as well. And so you would have to have conviction to hold through.
- I expect that the market may react very badly to upcoming earnings.
- business is burning through capital to grow.
- Currently, my biggest fear is stock price dilution.
Anthony Noto (The man in charge! CEO)
Was previously the Chief financial officer (CFO) and chief operation officer as well
Was previously the CFO of the NFL!
Also a managing director at Goldman Sachs.
Anthony has been an inside buyer, recently purchasing just under 22,000 shares with an average price of roughly 13.90 ish. He owns almost 3 million in total shares.
Introduction:
A)
Social Finance (SOFI) is a finance company:
- Operates an online platform providing financial services.
- It offers student loan refinancing, private student loans, personal loans, auto loan refinance, home loans, mortgage loans, and investments, as well as insurance products for renters, homeowners, automobiles, and others.
- SOFI has officially received regulatory approval to become a bank.
Mission statement:
Our number one goal is helping our members get their money right
b)
- SOFI is aggressively acquiring other company's - As such, is not expected to record growth throughout 2022 as the costs are quiet significant.
- SOFI had quartely consistent growth from Q1 2019 to Q3 2021 (Q4 and year end coming out soon!)
Operating segments:
Lending
Technology platform
Financial services
SOFI is basically a bank - it operates as a bank.
Bank of America rating:
"Bank of America’s Mihir Bhatia said he was impressed by SoFi’s SOFI, -9.42% breadth of offerings as the company strives to be a “one-stop shop” for financial services. He initiated coverage of SoFi shares with a buy rating and $17 price objective Friday, writing that SoFi is “not just another neobank.” "
marketwatch.com/story/sofi-is-not-just-another-neobank-bank-of-america-analyst-says-11644601568?siteid=yhoof2
Building a competitive advantage - The Galileo
SOFI is building the Galileo as a Moat or a competitive advantage, which can make them unrivalled. This can be quiet significant if it executes well. It is hard to understand what it is, and it is mostly a technology play - I am going to try to understand it as much as I can.
Galileo is a leading Fintech infrastructure platform serving upcoming Neo banks (B2B)
Where as a bank serves customers (Bank to customer), the Galileo is a technology being developed which will serve neo banks (From SOFI to Neo banks service).
"Neobanks, sometimes referred to as “challenger banks,” are fintech firms that offer apps, software and other technologies to streamline mobile and online banking. These fintechs generally specialize in particular financial products, like checking and savings accounts. They also tend to be more nimble and transparent than their megabank counterparts, even though many of them partner with such institutions to insure their financial products."
"The merger between SoFi and Galileo has created an impenetrable moat that enables them to serve multiple verticals across the Fintech ecosystem and maintain a strong competitive position."
"Galileo Technology Platform: Galileo isn’t a bank and isn’t a regulated entity, but it empowers other Fintech platforms. Galileo provides an API (Application Programming Interface) and all the technology tools required to offer digital banking services without having a physical bank presence. It maintains a ledger, authorization settlement, fraud, fund movements and transfers all digitally and many more services."
Neo banks/ or the fintech industry revolves around:
Lending Companies
Payment Gateway & Mobile Payments Companies
International Money Transfer Companies
Personal Finance & Budgeting Companies
Peer-to-peer lending/Crowdfunding/Equity Financing Companies
Consumer Banking Companies
Insurance Companies
Investing/Robo Stock Trading Companies
Blockchain and Cryptocurrency Companies
What Galileo does (as I understand it, and in simple terms) offers neo-banks (start up financial service providers) the platform (the solution) (the app) to allow them to run their business so that the customers of those neo-banks can have access to the banking services through their cell phones and computers. This is what is refered to as Banking-as-a-service industry, it provides payment processing platform and a variety of services for Digital Banking companies.
Let's say you want to start up a new pet insurance company - you would contract SOFI for the app which customers would use and make monthly payments on and etx so you can focus on the insurance side of the business while SOFI takes care of the techonology side of the business.
Generally speaking, all these neo bank are associated in major ways to actual real banks for the financial support they require to run. And SOFI is creating a competitive advantage where by the provide the software solution, along with the banking solution (now that they are technically a bank) and they will provide
"BaaS can generally be understood as a fintech infrastructure that helps to reduce both the time and cost that fintech companies spend on getting regulatory requirements or licenses. As mentioned earlier, BaaS provides new digital banks and start-ups with third-party access to core systems and functionality so that they can integrate digital banking and payment services into their own product. BaaS reduces the technology requirements and capabilities to offer financial products such as maintaining account ledgers for different customer accounts that is required of a traditional bank."
"Galileo is at the heart of the BaaS revolution. Galileo through its BaaS platform provides significant cost savings and should continue to play a major role in the future of Fintech because these small challenger banks benefit from lower customer acquisition costs and Galileo provides them with almost everything they need."
Galileo has seen 6 consecutive quarters of accelerating growth.
seekingalpha.com/article/4427093-sofi-galileo-merger-deep-dive-building-impenetrable-moat-fintech-ecosystem
forbes.com/advisor/banking/what-is-a-neobank/
Important concepts:
- Can the fintech industry keep growing?
- Are consumers going to move into these industries for banking needs?
If you say yes to these two - you are likely onboard with the idea of Galileo. For Galileo to be a good investment, you have to think, they will continue to provide well as a bank.
They will grow over 5 years (Which I think they might, should they be honest about their mission statement)
Desired ROI:
With price targets of $17, and three instances where the stock reached above $20, and the current climate (bearish) market conditions, you should think carefully about your investments, specially whereas earnings is around the corner for SOFI.
A drop below 10.15 can cause significant downfall in the price as well. And so you would have to have conviction to hold through.
SOFI is not expected to deliver growth throughout 2022, as they have their work cut out for them.
It's hard to pencil out a desired ROI.
If sometime this year, we reach the price levels of 17-20, perhaps I would sell.
If we keep going down throughout 2022, I would buy more, but I would be careful to build the position slowly and methodically, and only should the conditions keep getting better.
I expect that the market may react very badly to upcoming earnings.
I think that beginning 2023, we could start see accelerated growth for SOFI and where as they deliver as a bank, and with the Galileo platform,
I would want to see:
$20 within the next 5 years
$50-60 within 10 years
An argument can be made it is speculative and expensive at the current price. I will keep watching it.
- I presently have a small position in SOFI - I am down 33% roughly on this position.
- My position is small, and it was started with the purpose in mind to build the position slowly over time, should SOFI keep going down.
- I am only sharing my thoughts on the company, you are responsible for your own buying and selling decisions.
- A drop below 10.15 can cause significant downfall in the price as well. And so you would have to have conviction to hold through.
- I expect that the market may react very badly to upcoming earnings.
- business is burning through capital to grow.
- Currently, my biggest fear is stock price dilution.
Anthony Noto (The man in charge! CEO)
Was previously the Chief financial officer (CFO) and chief operation officer as well
Was previously the CFO of the NFL!
Also a managing director at Goldman Sachs.
Anthony has been an inside buyer, recently purchasing just under 22,000 shares with an average price of roughly 13.90 ish. He owns almost 3 million in total shares.
Introduction:
A)
Social Finance (SOFI) is a finance company:
- Operates an online platform providing financial services.
- It offers student loan refinancing, private student loans, personal loans, auto loan refinance, home loans, mortgage loans, and investments, as well as insurance products for renters, homeowners, automobiles, and others.
- SOFI has officially received regulatory approval to become a bank.
Mission statement:
Our number one goal is helping our members get their money right
b)
- SOFI is aggressively acquiring other company's - As such, is not expected to record growth throughout 2022 as the costs are quiet significant.
- SOFI had quartely consistent growth from Q1 2019 to Q3 2021 (Q4 and year end coming out soon!)
Operating segments:
Lending
Technology platform
Financial services
SOFI is basically a bank - it operates as a bank.
Bank of America rating:
"Bank of America’s Mihir Bhatia said he was impressed by SoFi’s SOFI, -9.42% breadth of offerings as the company strives to be a “one-stop shop” for financial services. He initiated coverage of SoFi shares with a buy rating and $17 price objective Friday, writing that SoFi is “not just another neobank.” "
marketwatch.com/story/sofi-is-not-just-another-neobank-bank-of-america-analyst-says-11644601568?siteid=yhoof2
Building a competitive advantage - The Galileo
SOFI is building the Galileo as a Moat or a competitive advantage, which can make them unrivalled. This can be quiet significant if it executes well. It is hard to understand what it is, and it is mostly a technology play - I am going to try to understand it as much as I can.
Galileo is a leading Fintech infrastructure platform serving upcoming Neo banks (B2B)
Where as a bank serves customers (Bank to customer), the Galileo is a technology being developed which will serve neo banks (From SOFI to Neo banks service).
"Neobanks, sometimes referred to as “challenger banks,” are fintech firms that offer apps, software and other technologies to streamline mobile and online banking. These fintechs generally specialize in particular financial products, like checking and savings accounts. They also tend to be more nimble and transparent than their megabank counterparts, even though many of them partner with such institutions to insure their financial products."
"The merger between SoFi and Galileo has created an impenetrable moat that enables them to serve multiple verticals across the Fintech ecosystem and maintain a strong competitive position."
"Galileo Technology Platform: Galileo isn’t a bank and isn’t a regulated entity, but it empowers other Fintech platforms. Galileo provides an API (Application Programming Interface) and all the technology tools required to offer digital banking services without having a physical bank presence. It maintains a ledger, authorization settlement, fraud, fund movements and transfers all digitally and many more services."
Neo banks/ or the fintech industry revolves around:
Lending Companies
Payment Gateway & Mobile Payments Companies
International Money Transfer Companies
Personal Finance & Budgeting Companies
Peer-to-peer lending/Crowdfunding/Equity Financing Companies
Consumer Banking Companies
Insurance Companies
Investing/Robo Stock Trading Companies
Blockchain and Cryptocurrency Companies
What Galileo does (as I understand it, and in simple terms) offers neo-banks (start up financial service providers) the platform (the solution) (the app) to allow them to run their business so that the customers of those neo-banks can have access to the banking services through their cell phones and computers. This is what is refered to as Banking-as-a-service industry, it provides payment processing platform and a variety of services for Digital Banking companies.
Let's say you want to start up a new pet insurance company - you would contract SOFI for the app which customers would use and make monthly payments on and etx so you can focus on the insurance side of the business while SOFI takes care of the techonology side of the business.
Generally speaking, all these neo bank are associated in major ways to actual real banks for the financial support they require to run. And SOFI is creating a competitive advantage where by the provide the software solution, along with the banking solution (now that they are technically a bank) and they will provide
"BaaS can generally be understood as a fintech infrastructure that helps to reduce both the time and cost that fintech companies spend on getting regulatory requirements or licenses. As mentioned earlier, BaaS provides new digital banks and start-ups with third-party access to core systems and functionality so that they can integrate digital banking and payment services into their own product. BaaS reduces the technology requirements and capabilities to offer financial products such as maintaining account ledgers for different customer accounts that is required of a traditional bank."
"Galileo is at the heart of the BaaS revolution. Galileo through its BaaS platform provides significant cost savings and should continue to play a major role in the future of Fintech because these small challenger banks benefit from lower customer acquisition costs and Galileo provides them with almost everything they need."
Galileo has seen 6 consecutive quarters of accelerating growth.
seekingalpha.com/article/4427093-sofi-galileo-merger-deep-dive-building-impenetrable-moat-fintech-ecosystem
forbes.com/advisor/banking/what-is-a-neobank/
Important concepts:
- Can the fintech industry keep growing?
- Are consumers going to move into these industries for banking needs?
If you say yes to these two - you are likely onboard with the idea of Galileo. For Galileo to be a good investment, you have to think, they will continue to provide well as a bank.
They will grow over 5 years (Which I think they might, should they be honest about their mission statement)
Desired ROI:
With price targets of $17, and three instances where the stock reached above $20, and the current climate (bearish) market conditions, you should think carefully about your investments, specially whereas earnings is around the corner for SOFI.
A drop below 10.15 can cause significant downfall in the price as well. And so you would have to have conviction to hold through.
SOFI is not expected to deliver growth throughout 2022, as they have their work cut out for them.
It's hard to pencil out a desired ROI.
If sometime this year, we reach the price levels of 17-20, perhaps I would sell.
If we keep going down throughout 2022, I would buy more, but I would be careful to build the position slowly and methodically, and only should the conditions keep getting better.
I expect that the market may react very badly to upcoming earnings.
I think that beginning 2023, we could start see accelerated growth for SOFI and where as they deliver as a bank, and with the Galileo platform,
I would want to see:
$20 within the next 5 years
$50-60 within 10 years
An argument can be made it is speculative and expensive at the current price. I will keep watching it.
Disclaimer
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