The Super Bowl failed to raise SoFi Technologies (NASDAQ:SOFI) stock from the depths. The neobank was due to open Feb. 14 at about $12.25, its market cap just short of $10 billion. That’s down by nearly half from its value a year ago, at the height of the meme stock mania, when growth and a name mattered most.
Today, it’s performance that matters. Investors will be watching SoFi’s full year results on March 1, hoping it can beat the consensus estimate for a loss of 16 cents/share and last quarter’s revenue of $291 million.
In the current market, paying 10 times revenue for a money losing stock is out of fashion. That’s one reason why smart money is taking Bank of America (NYSE:BAC) advice and buying the stock.
Buy low, sell high. Right now, SOFI stock is low.
Show Me
I bought some SoFi late last year and I’m waiting just like everyone else for the fintech created by former NFL treasurer Anthony Noto to perform.
As I wrote last month, SoFi aims to be more than just an online bank, and more than just an online brokerage. Its Galileo unit has Application Program Interfaces (API) that make it a wholesaler, as well as a retailer, of financial services.
But if you just look at its financial statements, what you find is still a company that writes loans and sells them. It’s the distance between what SoFi is and what it hopes, wishes, and expects to be that is the most dramatic part of its story.
The distance was on full display Feb. 13, when the stadium on which Noto bought naming rights hosted the Super Bowl. All the glitz, glamour and grit had SoFi’s name attached to it. But most viewers had no more idea what SoFi meant than the Coinbase (NASDAQ:COIN) bouncing QR code commercial.
Change is Coming
The purchase of Golden Pacific, a small California bank, became official on Feb. 2. This means SoFi can finally take deposits and engage in direct banking activities. It also means the company is under the direct supervision of the Comptroller of the Currency.
That approval has some strings attached. The SoFi Bank, now based in Utah, is not supposed to engage in cryptocurrency transactions without prior permission. That sounds onerous, given that SoFi’s brokerage already trades crypto. But many national banks are also engaging in crypto operations, so analysts aren’t focusing on it. Even if it’s forbidden for the bank, it’s not forbidden for the brokerage.
In any case, SoFi now plans to launch a nationwide media campaign for deposits under the slogan “Break Up With Bad Banking.” It’s beginning on TikTok, Twitter (NASDAQ:TWTR) and Meta Platforms’ (NASDAQ:FB) Instagram. The Twitter feed hosted a contest during the football game, giving away $25,000. The campaign features a direct deposit interest rate on savings of 1%, at a time when the average rate is .03%.
The Bottom Line
SoFi’s claims are now about to be tested.
Investors won’t see proof, one way or the other, until early June, when SoFi announces its first quarter results for 2022. The March 1 numbers will matter less than what management says about the early success of its media campaign, starting today.
SoFi stock is still getting analysts’ love, with 8 of the 11 following it at Tipranks telling customers to buy, and with a price target of $18.86/share, 54% ahead of where it is now.
But you should expect more volatility. SoFi is still a sailboat, not a great financial ocean liner, meaning it’s subject to all the risks of the current financial environment.
On the date of publication, Dana Blankenhorn held a long position in SOFI and BAC. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
Dana Blankenhorn has been a financial and technology journalist since 1978. He is the author of Technology’s Big Bang: Yesterday, Today and Tomorrow with Moore’s Law, available at the Amazon Kindle store. Write him at danablankenhorn@gmail.com, tweet him at @danablankenhorn, or subscribe to his Substack.
