Comeback oder Untergang? | SoFi Technologies Aktie
SoFi is one of the companies that is relatively new to the payment sector on the stock exchange. After entering the market, the share price fell rapidly, but investor interest is still high. Is the currently difficult market situation perhaps exactly the right time to strike at SoFi Technologies? We discuss that in this video, have fun. Many thanks to the channel members Jan Engelmann, Fabian Marquard, Martin Klemer and Fabricio Rutz. If you would like to support the channel, then click on the Become a member button below the video and find out what advantages channel members have. Overall , there are three to four types of players in the global payment sector: • Providers with their own wallets such as Venmo and PayPal, where you can use the wallet for online shopping on different websites, for example, or send money to each other among friends into the virtual wallet.
• Providers of online payment interfaces such as Stripe, which offer technical interfaces that providers of online shops and websites can integrate in order to be able to process payment transactions on their website. • B2B offline payment providers such as Square and Block. These providers make money by charging fees for each transaction, e.g.
in-store via credit card, which are usually paid by the merchant. A stock analysis of Square can be found here linked. • The aforementioned companies were all in the area of relatively mundane payments. But there are also the so-called alternative lenders and the robo-advisor division , which also includes SoFi Technologies. They make their money by either charging service fees from borrowers and investors or transaction fees from the bank.
All of the aforementioned markets are now increasingly being occupied by so-called FinTech companies, although these were often typical tasks of a traditional bank in the past. While the FinTech players have reduced costs and thus made the use of their products advantageous and efficient for everyone involved, traditional banks have not been able to reduce their fee structure to a comparable level. So while potential borrowers can get their rating and resulting interest rates from these FinTech lenders in minutes , traditional banks will have a hard time quickly finding the best deal for their customers due to the fee structures in the old established banking world and fine print vary from provider to provider.
Additionally, most FinTech providers focus on just one or two segments, unlike traditional banks, which typically have a very broad product offering. This requires clients to either choose one of the few (almost) "full service" providers like SoFi that offers lending and wealth management, or to sign up with many companies, adding complexity and time for them. In this respect, the speed advantage and often the convenience of modern FinTech companies remain, if you want everything from a single source and usually a personal contact person , you are often in the right place with the sizable banks. It will be exciting to see how and whether banks are increasingly orienting themselves towards the up-and-coming FinTech competition and are therefore becoming ever more streamlined.
SoFi is a US-based provider of credit and wealth management (Social Finance Inc.). SoFi also offers term life insurance in partnership with Protective Life. Robinhood and SoFi were the two best-funded FinTech startups in the US at the time, with funding of $5.6 billion and $3 billion, respectively . Direct money transfers, e.g. mobile payments such as PayPal or Square, as well as activities such as crowd funding, can be excluded from business activities.
The FinTech company SoFi is explicitly not or not yet active here. In principle, SoFi focuses on the area of marketplace lending and robo advisors, although they do not fit exactly into the latter with their wealth offers. According to industry experts, however, their financial service products appear similar to typical robo advisor products. Examples of the Company's lending products (Alternative Lending is its market segment) include ▪ Personal Loans ▪ Student Loan Refinance (for federal & personal loans) ▪ Parent Loans ▪ Parent Loan Refinance ▪ Mortgages and Mortgage Refinance In the Alternative Lending market in the US, their closest competitors are LendingClub and prosper The personal loans offered by SoFi in the Marketplace Lending market segment are characterized by the fact that they do not charge an organization fee (fee), while the two competitors LendingClub & Prosper charge 1-6% here. In a direct comparison to the two competitors, the interest rates at SoFi are usually cheaper and the terms are even slightly longer.
The minimum amount that must be borrowed from the borrower is slightly larger at SoFi. In principle, SoFi seems a bit more attractive here than its US competitors, but they or new competitors could follow suit at any time with aggressive pricing strategies, so this is not a sustainable moat Consumer and corporate lending in the FinTech sector is mainly carried out by lending platforms that act as marketplaces, connecting borrowers with lenders. This applies, for example, to the business model of SoFi, which is active in marketplace lending. This means that these FinTech companies, in contrast to banks, which on the one hand accept deposits and at the same time issue loans to consumers and companies, do not accept deposits or issue loans themselves. They take no risk to their own balance sheets and therefore receive no interest income directly from borrowers.
The main benefit of these companies is to reduce the cost of borrowing for borrowers and increase the rate of return for lenders or investors, as well as enabling many consumers to obtain credit in the first place. Companies like SoFi usually connect private or commercial “investors” or “lenders” with “borrowers” in a kind of marketplace. Marketplace lenders, one could say investors, primarily target consumers and small businesses that are underserved or unserved by traditional banks , and thus only operate at the lower end of the market. The high net worth individuals who form the core of the market still turn to banks or other traditional investment managers for financial advice, making SoFi's target audience (even) smaller. There are two main types of fees that lending marketplaces like SoFi benefit from: ▪ Transaction fee from the bank ▪ Service fees for borrowers and investors, e.g. B. Late
Payment Fees, Check Payment Fees and Service So, for example, with low fees, SoFi manages to be attractive to both investors and borrowers, at the same time, through their cheap offer, they reduce their chances of sales and earnings compared to the competition, which in turn for the investors of the stock is not so positive. SoFi positions itself as a social community - as a social finance company. That means alongside their lending and wealth management business, they offer community events, e.g. E.g. dinners, happy hours, panel discussions, networking opportunities etc. to connect “members” – as they
call their customers – with each other. In addition, customers who already have a loan receive an interest discount on further SoFi loans and do not pay for SoFi wealth management. On the one hand, this secures the solvency of its customers and members and also ensures a sustainable, possibly more loyal clientele and can be seen as a trademark or USP of SoFi . The designation members instead of customers also seems a bit more valuable and it seems as if SoFi takes special care of its customers. In addition, SoFi offers its members the following services, for example: ▪ Career advice for career changes, job search, personal branding, including personal meetings with the advisors. ▪ Unemployment Protection – a program that borrowers can apply to if they lose their job through no fault of their own. After a successful application, the loan payments are suspended for some time, which is additionally attractive for the borrowers.
This suspension can be extended up to 12 months. ▪ Entrepreneur program to support starting your own business with mentoring and resources, access to investors and a peer network. In addition, SoFi offers to defer student loans for 6 months to use the free resources to start a new business. As already mentioned, in addition to lending, SoFi's asset management in the area of financial services is part of SoFi's products.
Here they also offer relatively low fees and the products are free for SoFi borrowers, for example. Unlike other FinTech wealth management companies, SoFi offers a more customized wealth management approach with personal advice. But similar to other FinTech players, the portfolio is based on ETF funds that are actively curated by SoFi's financial specialists. According to SoFi, their advisors receive no commissions and support SoFi clients in planning and achieving their personal financial goals. SoFi portfolios are automatically rebalanced.
SoFi's portfolio is based on a mix of ETFs that track over 20 indices and includes US equities, international equities, high yield bonds, real estate, short-dated government bonds and country and regional equity markets. Based on the user's risk preference, money is invested in stocks and bonds at different percentages to meet that risk preference. The structure behind it is also strongly reminiscent of robo advisors, always based on a similar principle, which is why I focus more on the robo advisor market in the forecast, as industry experts increasingly see parallels here. The competitors in this area are the companies Betterment and Wealthfront, which offer similar products. These are not significantly more expensive than SoFi, but do not offer any products in the alternative credit market, so this combination is still relatively exclusive at SoFi. In 2020, SoFi merged with Galileo, the pioneering enterprise technology banking infrastructure that counts FinTech companies among its customers.
So here they offer technological foundations for other FinTech companies, which is an additional attractive source of income. In the key figures segment, we also take a look at the development in this market segment. These expansions, together with the larger range of financial services, are important in order to become more independent of the lending segment, since there are default risks here, especially among private borrowers.
In this respect, the financial services segment and the platform segment secure the company in a certain way. SoFi is ranked 17th among the largest managers of values with a robo-advisor approach in March 2021. Da Betterment, for example, ranked 4th . They are still relatively far behind here, through the good developments in 2021 are likely to have already climbed a little in this market. But we can see from the values that Edelman and Vanguard are almost unassailable in front. SoFi's stock is still one of the 15 most popular stocks for millennial stock investors in the USA in Q2 2021, well behind the trend phenomena AMC and behind the market giants Tesla, Apple and Co. Nevertheless, 13th place is very high when you consider that
the stock is still relatively small. Certainly, the sharp fall in the share price has also caused many millennials to exit again. However, the popularity among younger market participants may also show that the business model behind SoFi is understood by younger investors and is attractive. By funding size, SoFi was the world's largest independent neobank, or FinTech company, as of 2020. Of course, that's just a snapshot until it went public, but the number is telling.
In the market position, I give 4 out of 5 stars with a view to the business model. Since they are still very new in the industry, this good rating is actually very debatable. What impressed me positively is their relatively clear connection to niche markets, such as the lending market, especially with a focus on private customers and wealth management. The goal behind everything seems to be to support young people and enable access to good education, as well as to support young families.
On the one hand for student loans, but then later also in asset management. The merger with Galileo also makes the company far more stable. To be fair, one has to say that they are still attractive mainly because of their low fees , but this can change at any time due to new competition and , especially at the beginning, enormous growth in the number of users is a prerequisite for being able to think about the market.
More on that later in the risks section. Follow the Techaktien channel on Instagram so you don't miss any news from the world's stock markets. The channel provides you with small stock analyzes and always puts you in a good mood with good memes! Due to the short history, the key figure analysis is still relatively short.
The company neither pays dividends nor is it currently making a profit, which is why the dividend yield and P/E ratio cannot be considered anyway. In annual adjusted net sales, they grew from $200 million in 2018 to more than $900 million roughly into 2021. The 12 months from Q4 2020 to 2021 do not cover all of 2021 here. Sales in 2021 will probably be around one billion dollars.
This means that sales have increased fivefold since 2018. If we look at revenue by segment, we see that the lending market is the big pillar. Here, 2018 revenue has grown from more than $200 million, which was almost all of the company's revenue at the time, to almost over $700 million in the trailing 12 months since the end of Q2 2021. The growth in sales with their technology platform was even stronger. This practically rose from 0 to almost 100 million dollars in 2020 and sales will continue to grow in 2021. This also includes the sales with their Galileo segment, where they are active in the B2B area and provide infrastructure for other fintech companies, e.g. also
for RobinHood. On the one hand, they benefit from their know-how and at the same time they can also use their technical know-how for their own products. The company's own financial services, i.e. wealth management with a touch of robo advisors, also grew, although they only have a comparatively meager turnover of around 20 million dollars.
Say segment corporate, i.e. their offers for companies, are not yet in great demand, but of course there is future potential here too. In the EBITDA, i.e. the operating profit before the deduction of interest and depreciation, we see that they will probably manage to become profitable for the first time in 2021.
In 2018 there was still a loss of around 500 million dollars, which was quite negative. In terms of EBIT, the loss is currently still very large. The reason why SoFi lists EBITDA as a key metric in measuring their profits may also be because they've recently made a lot of money in the form of stock-based expenses, so-called stock-based expansions. These are not included in the EBITDA, but are included in the EBIT.
Of course, heavy depreciation is not included in the EBITDA either. This means that even if they become profitable here in 2021, they are far from being so in terms of EBIT and actual profit. For example, the net loss in the third quarter of 2021 was $30 million.
In the first 9 months of 2021 even at almost 400 million dollars, which is enormously high in terms of their sales. The main factor that many investors look at is the positive development in the area of their members, i.e. customers. Here they have been able to grow strongly since the Corona outbreak in 2020, to almost 3 million members in 2021. At the beginning of 2020 there were only about one million. Above all, the use of their financial service products, i.e. personal investment advice, is constantly increasing . Here they have already been able to sell more than 3 million products to women and men, with a strong upward trend, while lending could only increase slightly.
The fact that financial services products aren't taking off as much yet is also because they don't generate as much revenue from financial services products per product. A further expansion of insurance products will be necessary here in the future, but the banking license due in 2022 will certainly have a positive effect here. More on this in the forecast chapter. When we talk about key figures, the expectations of the analysts are often important here. They expect sales to double in 2022 and 2023.
From approx. 1 billion sales in 2021, SoFi 2023 is expected to be around 2 billion dollars. Since they will still be negative in EBIT in 2021, a profit in the operating result after depreciation and before interest and taxes is expected for the first time in 2023. The recently obtained banking license certainly hasn't lowered expectations.
A positive factor here is that the share has recently been severely penalized. But one must not forget that the stock is not making any profits yet and even if they were to achieve an EBIT margin of 10% in 2021, which they are very, very far from today, the P/E ratio would currently be over 80. Despite the sharp drop in price, the share is still associated with strong expectations.
For the key figures I therefore award 2.5 out of 5 stars. The growth in membership numbers and also in sales and EBITDA looks good. The level of debt has also fallen recently. At the same time, the company is not yet generating any real profits and must still grow strongly.
And that brings us to the risks of SoFi. The first risk lies in a lack of profitability in 2023. The expectations of the analysts are relatively clear and developments that are contrary to this will certainly lead to price declines. With a damage level of 9 and a probability of occurrence of 50%, I rate the risk here as not low. Don't be fooled by great growth numbers in members or sales. Especially in times when the stock exchange severely punishes negative news in the payment sector, this can have severe negative consequences despite the already low price.
The second risk lies in the nature of the FinTech market. SoFi's unique selling point is that they offer convergent products, which means that the member or customer can combine and conclude several financial services and loans with SoFi at the same time. On the other hand, it is a market in which new competition can arise very quickly . On the other hand, they work with their banking license, which is not so easy to obtain, and with their B2B technology platform, which is used by RobinHood, for example, because this way they secure technical know-how and a certain independence from individual products. Ultimately, however, this is still not a safe moat in the very large FinTech market. Therefore, I estimate the level of damage from new competitors and price attacks at 6 and the probability of occurrence at 40%. The third risk is that many short positions have recently been opened in the stock . This suggests that many investors assume that the share or the company will not develop positively or that risk 1 will occur.
This can intensify the effect of risk 1 and cause lasting damage to the stock. In combination with bad news coming in, many investors would certainly get out of the share. Of course, there is also an opportunity here with a short squeeze, but the risk is high. I rate the additional level of damage as rather high at 7 and I see the probability of occurrence coupled with risk 1 at 50%. Overall, I award 2 out of 5 stars in the Risks category.
To be fair, one has to say that the possible lack of profitability runs through the category of key figures and risks. At the same time, this also reflects the risk associated with the share. As great as their business model and possibly growth opportunities are, their business is unprofitable today. However, there is also strong potential here if you ignore the risks and aim for a reliable profit zone. Then the stock would probably be able to generate a strong boost. At the same time, however, there is also the risk of enormous price losses.
A key question, aside from the fierce competition in the FinTech market just mentioned, is whether the legacy banks can catch up by adopting new technologies and transforming successfully enough to shake off most of the new FinTech competitors due to their sheer size , or whether FinTech startups will almost completely overtake the old system. The answer probably lies somewhere in the middle. Both traditional banks and FinTech companies are likely to coexist, with FinTech companies such as SoFI in particular carving out their own respective niches across product categories.
The three main strategies pursued by traditional banks to remain relevant are: ▪ Acquisition of FinTech companies ▪ Making strategic investments in FinTech startups ▪ Partnering with technology companies to leverage the expertise of both companies Theory in the room, if SoFi continues to be unprofitable , whether they will be swallowed up with their technology by an established bank, which would then align the company with other funds and want to integrate it. Since SoFi is extremely strong in advertising, for example through its appearance as part of the Superbowl in the USA or through various other advertising campaigns, this could be a logical step for a larger bank to tap into the growing user base. For investors, such a takeover would of course be a moderately attractive end to their growth stock, but it may also save the stock from a complete collapse if the company does not become profitable. Currently, however, things are going in a completely different direction: The Office of the Comptroller of the Currency (OCC) and the Federal Reserve have approved the company's applications in connection with the planned acquisition of Golden Pacific Bancorp Inc. SoFi here in the future can act much more independently and can significantly expand its range of financial services, which is initially positive. Crowdlending is always mentioned in the headline of the following statistics.
Both crowd lending and marketplace lending are meant here. Crowdlending differs from marketplace lending in that crowdlending tends to target companies. In the case of Marketplace Lending, it is often private individuals, as is the case with SoFi. The number of loans granted in the crowdlending sector is also larger and will grow from around 30 million loans in 2017 to around 55 million in 2025. Marketplace lending is behaving similarly, growing to 30 million loans by 2025.
That's not 100% in either case within 9 years. In this respect, the growth here is constant, but far from exponentially scaling or excessively strong. The difference in the forecast becomes even clearer when we look at the transaction volumes. Understandably, the crowdlending sector is doing much better here and will approximately triple between 2017 and 2025, although growth should already flatten out at the moment. Growth in Marketplace Lending over this period is only a meager 50% , with growth flattening out here too. With the slight increase in the amount of lending in both areas, the average value of the individual loans is falling.
In Marketplace Lending, where SoFi is active, the value will drop below $2,000 per loan by 2025. In crowdlending, we initially see an increase until 2023 before the value falls here too. And now it's getting exciting. The market is practically completely ruled by China. Europe and America hardly play a role here, although growth in Europe is not quite as bad, in absolute terms they are nowhere near the regions of China. With its focus on the US market, SoFi is of course not a player in China.
At the same time, growth in China is still relatively high at around 12%. There is also strong growth in many European nations such as Switzerland and Italy . The US is growing at less than 2%.
Not a particularly good prognosis. This also shows that the market here is somewhat more saturated. The growth in the investment market looks much stronger, including the sub-area that deals with robo-advisors. In contrast to neo-brokers, the use and thus the transaction value of robo advisors will grow very strongly by 2025.
From more than $300 billion in 2017, the market is expected to grow to nearly $3,000 billion by 2025. At the same time, the number of users also anticipates growth to around 500 million users worldwide by 2025. At the same time, however, the average value of transactions per user with roboadvisors falls slightly below the average value of investments with neo-brokers, although a steady increase has been observed in both cases since 2020 .
In contrast to the credit market, the US is far ahead here. Europe and China are also growing similarly. The situation here is not quite as different as in the lending market, but it is already clear that there is significantly greater sales potential in this financial investment segment. The growth in the USA or the growth rate per year here is also almost 30% in the USA. The market is also growing strongly in the other regions, especially in Japan. The only question is how long this growth will continue after 2025.
When we pull these projections together and look at SoFi's target revenue distribution , one thing becomes very clear. The marketplace lending business must inevitably lose some of its share of sales, and sales of financial services, as part of its investment advice, must grow strongly. On the one hand because there is more potential here, on the other hand because there is not so much to be gained in the lending market. At the same time, their technology platform offers the opportunity to benefit from the increasing popularity of neo-brokers and other players in the market, who can hoist them onto their platform. Ultimately, you can already see this development in the approaches at SoFi and the fact that they now have a banking license also gives them more options here. However, there is still a long way to go, and above all they must also become profitable.
The forecast therefore gives a relatively optimistic 3 out of 5 stars, although I would like to point out that the share is not yet where the market potential lies. I gave the market position 4 out of 5 stars because of their convergent business model. In the key figures it was only enough for 2.5 stars, since the company is still far
from a profitable business. The risks then also only received 2 out of 5 stars. In the forecast, Sofi finally gets 3 out of 5 stars, whereby it is clear that they have to evolve from marketplace lending towards more financial services offerings. So overall we get a rating of 2,875 stars, which I round up to 3 stars. My Opinion: I personally find the approach behind SoFi very exciting. Since the stock has recently been severely punished, I struck here last week with my mini fun trading portfolio.
Still with such a tiny position that makes up less than 0.5% of my total portfolio. I see the chance here that the stock can overcome the negative mood surrounding its earnings numbers and thus exceed investor expectations in some time. At the same time, the risks here are enormous.
On the one hand because marketplace lending is not a real growth market and for a serious position in the financial services sector they have to outperform many strong competitors and their niche is relatively small. In this respect, I don't see the purchase of the mini position as a serious approach, but rather as a fun trade. I would not enter with a larger position due to the overall poor rating here in the video, since the poor risk/return ratio from my point of view given the still high rating of the share is not good for my overall strategy with a factor approach and ETF savings plans.
The SoFi share is included in the Invesco KBW Nasdaq Fintech UCITS ETF Acc with a weighting of around 2% at times. Behind the ETF is the KWB NASDAQ Financial Technology Index, which contains fintech companies from the USA with equal weighting. Außerdem sind sie zeitweise mit ca. 1% im First Trust Eurozone AlphaDEX® UCITS ETF enthalten, der auf dem NASDAQ AlphaDEX Eurozone Index basiert. Die AlphaDEX-Methode nutzt fundamentale Bewertungsfaktoren, um Aktien basierend auf ihrer Wertentwicklung auszuwählen und zu gewichten.
Also ein eher aktiv geprägter Ansatz. Was haltet ihr von der SoFi Aktie? Schreibt eure Meinung gerne in die Kommentare. Meine Kanalmitglieder können übrigens abstimmen, welche Aktie bzw. welchen ETF wir in der kommenden Woche analysieren sollen.
Wir sehen uns auch in der kommenden Woche wieder. Bis dahin! Bleibt gesund!
2022-02-21 21:25
