For some time it seemed that Fintech stocks were bucking the negative bearish sentiment of the overall tech industry. Among the list of fintech stocks, undoubtedly SoFi Technologies (NASDAQ:SOFI) is one of the most compelling. Unfortunately, the good times did not last forever.
High-flying SOFI stock has been taking a beating these past few weeks. SOFI stock fell from a high of $24 to a low of about $14.
This drop erased roughly 42% of the stock’s value within a few short weeks. It trades closer to $15 today.
A large portion of the decline can be attributed to general market sentiment turning bearish on high-growth names. However, there has been a slew of negative events putting downward pressure on the stock as well.
This dip is presenting long-term investors another chance to get in SOFI stock. Investors should capitalize on the stocks lower prices as nothing has materially changed with the company.
SOFI Stock Decline Caused by Large Exits
A lot of big-name investors have cashed out of SOFI stock last month. Social Capital Chief Executive Chamath Palihapitiya sold roughly 15% of his stake in SoFi. Chamath in a Twitter (NASDAQ:TWTR) post continued to re-iterate his support for the stock.
He indicated that the sale was done to “build up cash reserves and fund new investments”. Furthermore, he continues to hold on to 85% of his original stake in the company.
Softbank and its affiliated entities have also cashed out of the stock. The group will be selling about 50 million shares, a decent chunk of the total 800 million shares outstanding. Another notable exit from SOFI stock was Dan Loeb’s Third Point. The hedge fund sold 28.9 million shares at an estimated average price of $15.7.
These sales aren’t necessarily indicative of the long-term of SOFI stock. But I am a bit worried about the short-term movements. Sales like these happen all the time however the timing is pretty suspect. These big-money funds can be considered “smart money” therefore there is a chance that SOFI stock could trend lower.
I am carefully watching SOFI’s price action. In particular, the support at the $13 to $14 should hold. Otherwise, we could see the stock start to trend downward.
SoFi’s Long-term Potential Remains Intact
Despite these notable exits, I still believe in the long-term potential of SOFI stock. As mentioned in my previous article, SoFi is one of the most compelling fintech companies out there.
The company, if successful, has the potential to dominate the “winner take most” fintech market. This is due to the fact that it has consolidated multiple services into a single app.”
When I wrote that article around August the stock price was about $17. SOFI stock soon rocketed by around 40% to $24.
Ever since the start of the selling by these large investors, the stock has steadily headed down to the $14 level. I believe the stock is a good value at these prices and I am not alone in that assessment.
According to the website Tipranks, SOFI stock has an average price target of $25. Tipranks’ price target was based on the price targets of seven Wall Street analysts. These analysts have a high price forecast of $30 and a low price forecast of $19.
The average price target coincides with the strong resistance level preventing SOFI’s stock price from moving higher. The stock has bounced back down every time it’s gone to these levels three times already. The first time in early February after its de-SPACing. The second time around June and the third time just recently.
Long-term investors should consider buying SOFI stock.
External news such as inflation or the emergence of a new coronavirus could put pressure on the stock in the stock in the short-term. But long-term investors could still reap huge benefits from buying one of the premier fintech names.
On the date of publication, Joseph Nograles did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
Joseph Nograles is a part-time freelance copywriter focused on the financial industry. He has worked in a wide variety of industries from tech to consulting with one of the “big four.” He has always enjoyed analyzing businesses and has been a CFA charterholder for nearly a decade now.