Despite the pullback in growth stocks and special purpose acquisition company (SPAC) holdings, that shouldn’t kill the enthusiasm for Social Capital Hedosophia Holdings (NYSE:IPOE). IPOE stock is the holding company that should eventually turn into SoFi.
The pending purchase of SoFi has many investors excited, but there’s a fair amount of hesitancy in the stock at the moment. Considering the stock is down about 35% from the February high, it’s understandable why investors are concerned.
However, that’s exactly the kind of decline we like to see in holdings that we like for the long term. Opportunities knock often in the stock market. But they do not knock without first striking a bit of fear.
In March 2020, it seemed like the world was going to end and that the stock market was a perfect place to destroy our wealth. Fast forward only a couple of months later, and the indices were at new all-time highs.
With IPOE stock, there is short-term pain. Now the hope is that that will equate to long-term gains.
What Is SoFi?
According to the company, “SoFi is a different kind of finance company whose goal is to help people get their money right.” The SoFi website goes on to say:
“Getting your money right means different things to different people. For some, it means being debt free. For others, it means finally being able to buy a home. But no matter what it means to you, we believe there are four key principles to help anyone start.
“Our products are built around our members — so that they have the tools they need to take control of their financial futures.”
SoFi offers a number of tools to help its customers pay down debt, build up a safety net, invest and “save for retirement (and other goals).”
The company offers various products to help achieve these goals. Everything from insurance, estate planning, student loan refinancing, home and personal loans, automated investing, initial public offering (IPO) investing, credit cards and more — including crypto.
Assuming the reverse merger goes through — it’s likely, but not a guarantee — this could be a great opportunity for investors to get into a long-term growth story.
In January 2020, SoFi logged 1 million customers. That figure now stands at 1.7 million, and by the end of this year, the company expects to hit 3 million customers.
As the trend toward digital currency, debit and credit continues to move away from checks and cash, SoFi is looking to capitalize on this trend. Further, it’s not bogged down by the same type of overhead and operations of a traditional bank.
As the company leverages its added customers and uses technology to keep its costs low, we have a real opportunity for growth and profitability. So while IPOE stock may be flying under the radar to some degree, it seems like a real opportunity for investors looking for long-term growth in the fintech space.
Bottom Line on IPOE Stock
Now, SPACs are a little different from IPOs. We won’t get into all the differences, but essentially, SPAC offerings are acquisitions that allow companies to go public. They are not guaranteed to go through, although in many cases they are very likely, particularly for high-profile ones like SoFi.
Further, the company can get away with making its own claims with less regulatory oversight than an IPO.
In any regard, the company expects to go from $621 million in revenue in 2020 to more than $3.5 billion by 2025. That’s a pretty big increase in just a few years. While there is risk in that estimate, there’s also a lot of potential. If SoFi can get there, buying IPOE stock down here should pay off quite nicely.
Shares peaked just north of $27.50 and have largely failed to hold up over $25. However, currently near $16, IPOE stock is already down about 35%. At its recent low, the stock was down nearly 50% from the high.
Technically, we don’t have a great-looking chart here. However, we’re not buying IPOE stock because we believe it has a superior technical pattern. We’re buying it because we believe it has superior growth over the next several years.
In that sense, a poor technical setup kind of works in our favor. A close below $14.75 could put the March low in play near $13. Either way, I would view that as a long-term buying opportunity.
On the date of publication, neither Matt McCall nor the InvestorPlace Research Staff member primarily responsible for this article held (either directly or indirectly) any positions in the securities mentioned in this article.
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