 🤖 Summary:
The article discusses the disconnect between SoFi Technologies’ (SOFI) strong performance and its stock price, which has been trading at lows despite significant revenue growth and improved profitability. SoFi reported a 43% revenue growth in Q1’23 and exceeded analyst estimates, yet the market has undervalued the stock. The market initially saw SoFi as overvalued when it went public via a SPAC, resulting in a repricing and multiple compression.
However, the author argues that the market has gone too far in undervaluing SoFi, considering its robust growth and profit potential. The article suggests that investors may be confused by the use of the adjusted EBITDA metric and proposes that SoFi should shift to an adjusted profit metric to provide a clearer picture of its profitability. It also addresses misconceptions about SoFi’s loan book, emphasizing that the company appropriately accounts for expected loan losses.
Analysis:
The article presents a bullish perspective on SoFi, highlighting its strong financial performance and the disparity between its stock price and fundamental prospects. The author argues that the market’s undervaluation of SoFi may stem from confusion caused by the adjusted EBITDA metric. By shifting to an adjusted profit metric, the author suggests that the market would better appreciate SoFi’s profitability. Additionally, the article addresses concerns about SoFi’s loan book, clarifying that the company adequately accounts for expected loan losses. The author emphasizes CEO Anthony Noto’s confidence in the company’s financials, demonstrated by his significant share purchases.
I agree – I think everyone else is wrong and we’re right.
Again, there's a reason we cashed out into the uncertainty of the banking crisis. We will certainly be adding SOFI back in - as it's tragically undervalued at $4.50. As a new trade, I would go with:
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- Sell 20 SOFI 2025 $5.50 puts for $2 ($4,000)
- Buy 50 SOFI 2025 $3 calls for $2.45 ($12,250)
- Sell 30 SOFI 2025 $5 calls for $1.60 ($4,800)
That's a net $3,450 on the $10,000 spread that's $7,500 in the money to start.
