Stock recommendation time: SoFi is a buy...

I haven't written much about the stock market of late because I have had this "Sell in May, Go Away" type of attitude:

https://thrivingwithinterest.blogspot.com/2021/05/inflation-is-here-and-sell-in-may-its.html

That being said, I have thought that Europe was a fertile place to find some buys:

https://thrivingwithinterest.blogspot.com/2021/05/where-to-invest-now-europe-of-course.html

By and large that has worked pretty well:

European markets reaching new highs... 

While the S&P is struggling to break out

It appears that the S&P is on the verge of taking out new all time highs and resume its uptrend. Hence it might be time to get back in. I would still wait a bit, that being said, there is a stock of interest to me: SoFi.

What is it? It's a newly listed Fintech company that recently went public via a SPAC deal. They offer some traditional financial services such as mortgages and personal loans, wealth management and credit, in addition to more advanced offering such as stock and crypto trading, SoFi branded ETFs, and robo-advisory services.

What sort of growth rate? One word, immense. They have had 7 consecutive quarters of increasing YoY member growth with YoY numbers reaching a 110% growth rate in customer base. SoFi has reported better than expected revenues in the latest quarter reaching $216 million and they expect to achieve 60% growth this year. They are also on track to swing to a net profit this year. In order to achieve continued growth they will expand into new lending categories (like auto loans), expand their Financial Services platform, and look for new acquisitions such as the Galileo one and Golden Pacific Bancorp to boost top line and bottom line numbers.

How is management? Excellent. Anthony Noto has an impeccable pedigree (both educationally and professionally) and is a great leader that has inspired SoFi's transformation since 2018 by going into new businesses, expanding current offerings and securing the funding necessary to tide it over until leading SoFi to its recent SPAC merger.

How do the technicals look? Juicy. A traditional cup and handle formation has just been created:

What's the rub? Execution risk and the valuations of course. They are clearly not the only fintech company trying to do these types of things and the stock is not cheap. Valuations for a high growth stock are always difficult to judge and by definition can be rather arbitrary. Comparable high growth financial companies such as Square, Paypal (and others) trade between 5 and 20x revenues (SoFI stands at 17x). On a PE basis SoFi is off the charts given that it is only about to break into profitability this year but as a reference it's high growth peers are in the 70-250x PE range. The stock could be up somewhere between 2 and 5 times from here over the next few years if it is able to achieve similar valuations based on the continued growth rates of the past.

Bottom line is this. Yes it's expensive and yes there is risk. But if past performance is any guidance of future results, then you are in good hands with the SoFi management team and your stock portfolio could greatly benefit from holding some shares.

Bonne chance!