SoFi Stock Looks Like Good Value Below $ 21
SoFi Technologies (NASDAQ:SOFI) still seems to be good value here now that it’s public, which has earned it an additional $ 1.91 billion in cash. In addition, on May 24, the company produced its 10-Q deposit, and on May 31, he sent a presentation to investors. (For some strange reason, the company hasn’t released any actual results, just a slide show.) Still, SOFI stock is still worth between $ 23.91 and $ 27.80.
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This means that the stock, at $ 20.84 on June 24, is undervalued by at least 14.7% to 33.4%, as I wrote in my article last month.
For example, on page 9 of its investor presentation, the company reaffirmed that its previous directions. He still expects to achieve $ 27 million in adjusted EBITDA (earnings before interest, taxes, depreciation and amortization) this year. However, he also shows that he expects an EBITDA margin of just 3%, which implies revenue of $ 900 million. That’s less than the $ 980 million on page 41 of his original deck SPAC (Special Purpose Acquisition Corp).
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Where that leaves SoFi
Sofi also provided guidance for the second quarter, showing that Adjusted EBITDA could vary from $ 8 million to $ 2 million. This is lower than the $ 4.1 million it made in the first quarter and also implies that the company expects to achieve up to $ 21 million in adjusted EBITDA in the second half. This will be more than 2.5 times Adjusted EBITDA in the first half of 2021, assuming its projections are met.
In other words, SoFi expects the second half of 2021 to see a significant increase in revenue and profit.
For example, this corresponds to what happened last year. On page 8 of the results slideshow, SoFi shows Adjusted EBITDA fell from minus $ 23.7 billion in the second quarter of 2020 to positive $ 33.5 million in the third quarter. This is a variation of $ 57 million on a consecutive quarterly basis. If that happens this year, SoFi could end up with a significant jump in its Q3 fit. EBITDA figures.
It may not sound predictable. For example, most of SoFi’s income comes from loans and a lesser amount from its technology platform. In the first quarter, loans stood at 77.8% or $ 168 million of its $ 216 million in quarterly revenue. There’s no specific reason why loan interest is expected to rise in the third quarter, so most of the variation is likely coming from the tech sector, primarily its online banking and brokerage unit. My feeling is that last year it increased with government payments. So this year it may not happen.
As a result, I suspect there will be a more gradual increase in the company’s revenue and profits until the end of the year.
What to do with SOFI Stock
I am included to keep my previous valuation estimates for the company, as first quarter earnings showed positive Adjusted EBITDA. In addition, the company maintained its previous forecast for the full year. I suspect this means they are falling behind their previous four year earnings and EBITDA outlook. This was the basis of my estimate that SOFI stock was worth between $ 23.91 and $ 27.80, leaving it undervalued by at least 14.7% to 33.4%.
So far, two analysts have written reports on the stock, according to TipRanks, with an average price target of $ 27.50 per share. This represents a potential gain of 31.77% from yesterday’s closing price of $ 20.84. So in this case the analysts and my own assessment agree, which is not often the case.
Therefore, I think enterprising investors might consider taking a position in SOFI stocks for the long term. If the price stays below $ 21, there seems to be a good potential return on investment for most long-term investors.
As of the publication date, Mark R. Hake does not hold any position in any of the stocks mentioned in the article. The opinions expressed in this article are those of the author, subject to InvestorPlace.com Publication guidelines.
Mark Hake writes about personal finance on mrhake.medium.com and run the Total Value of Return Guide that you can consult here.
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