Okay folks, so there is no shortage of stocks that are down huge right now, and with the tide increasingly turning from just a crunch on multiples to now a crunch because of recession fears, it's quite frankly, pretty difficult to get excited about the short-term prospects on stocks, right? It's a pretty damn tough macro condition, but the way that I look at it is that no matter what the market sentiment rain or shine, it's still true that at the end of the day, the more stocks go down, the less risky they are regardless of what's happening next. So it's important to know what's what when bottoms start falling out. And so in this video, I want to give you a violent and practical breakdown on Sofi stock that just reported earnings today and is now at 487. At the time I began planning this video, it's probably going to jump up some by the time I'm filming and it unpauses.

Yep, it did. And then it went back down. Fantastic. Welcome to 2022.

But I want to talk to you about the trajectory I see them, on the challenges they are facing and why I'm holding their stock right now. But first, before we get into it, I want to thank today's sponsor, Moomoo. Moomoo is a powerful trading app that allows you to trade stocks, Etfs, Adrs, and options worldwide. What makes it powerful? Charlie well as traders, we have to be willing and able to see patterns and favorable setups.

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Now back to the content. Okay, so fly so far. The argument that I made for this company in the past is that I see it as a banking and personal finance player that is going to grow at substantially higher rates than others in the space. And that's based on the outsized member growth that they've shown and the trend and proof of concept that they've shown in terms of being able to cross-sell those members different products that they have.

But at its core, let's be real. If you simply go on their website and see their main product offerings, it's pretty clear that you have a lot of headwinds against them right now. if we do head into recession just by simply looking at their website and what they offer. Obviously, investing and trading activity dries up quite a bit when markets go down because retail traders tend to be most interested when things are going up.

What about personal loans and lending? Well, those would be super super profitable when interest rates are going up, but not if those interest rates going up causes a recession, with many people starting to get scared to take out more loans and more debt. and with debt costs going up, a lot of people quite frankly are cutting back on that segment Now, the student loan segment also not such a good business right now. Why? Well, because the bonded administration has continued to pause it and provide no clear guidance on when it could be unpaused. which means that both borrowers and lenders are kind of left in this weird loop-de-loop where they're not able to plan for their financial future.

Both are playing a guessing game trying to figure out what's going to happen and when it's going to happen and nobody knows, It makes it very, very difficult for investors. Makes it very, very difficult for Sulfi, and makes it difficult for the people that they're trying to help with this. You want your government to give clear gun guidance, not just these last minute ditch efforts to extend it another three months or a couple quarters and obviously mortgage and refinancing on those are expected on a market-wide level to see a huge decline as rates go up as well. And if you feel like we're heading into an environment where we're going to get a deep contraction of economic activity, a recession, well, it's tough to get any excitement about these segments.

and you can make an argument that it's tough to get excited about almost any company, because again, economic interactions are something that hurts even the best of companies, right? This is my rule of thumb in times of bearish uncertainty, which is what we're in right now. You want to focus on finding deals on companies that can keep their high growth rate, trend, and or have high cash holdings because these are the companies that, despite whatever the Fed does or what the economy does, are going to be the ones that see through it to the other side. So today I want to talk about Sofi and what they just did on earnings and see if they fit this criteria. and then we're going to present my numbers and calculations on this moving forward.

So what did Sofi publish today? Well record gap and adjusted net revenue for Q1 of 2022. Most importantly, new member adds of 408 000 which is up 70 year-over-year new product ads of 689 000 which is up 84 year-over-year Although they did lower their Q2 forecast slightly, they did raise their full year 2022 guidance, and this is despite a lot of negative headwinds that we've mentioned, right? This is a company that literally the body administration won't allow one of its most important business sectors to operate at full capacity, and this guidance is being raised despite a lot of negative headwinds throughout the rest of the year, and despite a lot of companies in similar categories lowering their guidances. You look at some of these data sets, look at the consistent uptrend in quarterly adjusted net revenue, and the jump from Q4 to Q1 and then almost double from Q4 to Q1 and Ebitda, and then you go over to personal finance products and lending products. They've actually managed to be one of the few companies seeing an acceleration of growth in lending products quarter over quarter, and of course, financial service products are growing triple digits year over year as well.

They actually have the second highest quarter for product new ads which look like a deceleration from a percentage basis, but they added 689 000, which again, was the second highest quarter ever. Those were good numbers and most importantly, member growth is up another 408 000 in the first quarter, and many, if not most of these new members are going to feed into other products in future quarters. which is kind of the main business strategy of Sofi and it's easy to get lost to be a little lost Larry when you look at these numbers. but you look at other Fintech growth trajectories and you can see the story of why So Fi stands out.

Look at the growth trajectory of Sofi's revenues, and then look at, say, Robin Hoods yes, different companies, but both in the Fintech space and a lot of the same investors in capital. Look at the entire sector of Fintech when they're deciding which stock to buy and which to cash out of, but you look at Sofa, you look at Robinhood's very, very different trajectory. You pull up Ally Bank, which is a bit more comparable and a much bigger player than so far. Also, saw a drop from Q4 to Q1 obviously.

Upstart also in the financial space, reported strong earnings, but just dramatically dramatically revised their guidance downward, which caused a panic and probably some margin calls. The crash in Upstart was one of the most dramatic drops I've seen in a good company in quite a while. People are pretty damn scared right now with the prospects of a recession, but the point is, if you're looking at Fintech, you're looking at proof of concept the last few quarters and really track record as well as Guidance Supply really stands above the rest right now. And look, the stock went down today.

There was a weird hiccup where they released earnings before they should have released it. They said it was a human error. Who knows what was going on there. But the story of Sofia's earnings today is that despite an increasingly challenging economic condition, despite what might end up being one of the worst economic conditions and pullbacks that we've seen in decades, and despite again the government basically saying no you can't operate your main business, Delphi is still achieving its overall uptrend.

Now that is staying power. That's all I care about now you may say. But Charlie, you know, a recession. I don't want to touch any stock until we're well on our way back to an economic recovery and we've already had everything down and that's totally fine.

Maybe you're more interested in trades, Maybe you want this to go and rebound again before you bite and feel more confident. But if you're trying to plot an entry point or you're trying to consider whether or not this even deserves your capital, you want to be looking at the progression of this business's growth. Is it going to be a business that fits this criteria of being able to survive this push back and also thrive on the other side? Because if so, then there's a lot of alpha to be made on the other side of this. I was reading some articles on this today and somebody wrote: Sofi is still dramatically overvalued, has sky high valuations.

This is a 50 cent stock at best, and in a bear market. Quite frankly, you can justify any price. There's no such thing as a floor. Just say the Fed is going to raise interest rates to 20 and all of these stocks are at zero dollars.

But while a level of fear right now does make sense, sometimes you have to ask yourself how much is too much. Is there any real value to stocks right now? Or are they all worth nothing? You pull up the balance sheet for so far. For example, these numbers are in the thousands of units. Keep that in mind.

So Phi has 1.3 billion in cash on hand and their total assets are 12.2 billion dollars and their total liabilities are 6.7 billion dollars. You subtract, you subtract one from the other, and you get a net asset value of 5.5 billion-ish Even after the recovery today, you're under book value at 4.8 billion. Charlie, Are you stupid? This is a meme stock. Any stock that retail traders liked that deserves to go down until it goes bankrupt again.

Now let me ask you this question. At What point at what point do you look at a company and say, okay, well, the actual net assets that it has on its balance sheet are higher than what the entire market cap of the company is. and this company is growing substantially more than a lot of other players in its niche and a lot of other players in the broader market. If you had told me a year plus ago that some of the most exciting and fastest growing companies that have shown huge proof of concept would be trading below their net asset value, I'd say what, you're crazy.

multiples can go down. They always do. But below net asset value. That's stuff that only happens like once every 20 years.

This market condition is so bad that people don't even want to pay book value for stocks anymore. In fact, I think if this company really really beat on earnings, it still would have gone down Ew stock. Let's get out of it. Let's get into cash as fast as possible and that's fine.

let the market go through its paints. So anyways, these are my current calculations on sofa. I don't take my word as bible, these are just my calculations and my thoughts that I've updated as economic conditions have changed and so Fi has shown proof of concept in some areas and has shown some weakness in others. A lot of my original forecasts were based on the Fed's forecast that they wouldn't be raising interest rates through 2023 or 2024, and we're based on forecast that inflation would start coming down towards 2023, which we haven't even seen happen yet.

and in 2019, I projected that 2020 would be a good year for many different stocks. But of course in March you saw most stocks go down about 50 60 and some of our stocks down 80 percent. In the past, a lot of macro factors have slapped me over the head like a dog and I wasn't even barking. Usually it's if you make noise that you should get slapped, but not me.

I also did not see coming at the start of 2022 would be the worst start to the year for the stock market since 1939. I especially didn't see that coming during a period where economic growth and activity was very, very, very strong. I also completely failed to anticipate the Russian invasion back in December, when it would have been useful when we were making price targets in terms of when inflation would start picking down. I also didn't anticipate that the government would try to spend even more money.

Now we're in the situation where you're in one of the worst macro conditions that we've had for decades. But Rain or Sean, I always look at what's ahead of me and I try to forecast what companies are going to be doing based on the track record they've had, based on the industry projections, and based on an optimism that over time things do get better and improve anyways. I went through and filled out reported revenue from 2019, 2020, and 2021. I then put in the numbers.

If so, Fi meets their guidance for 2022. that would be a year-over-year growth rate of 49. I went ahead and ran the numbers through our qualitative factors and projected a gradual deceleration of growth to a tune that drops rates from 35 percent to 17 by 2026.. my growth decelerator was about 50 percent.

If you're in zip trader you I have the entire template. It's about a three page or at least three table template that allows you to put all the information together and project a growth rate and then also compare that to different multiples throughout history, and I projected a 50 growth decelerator which ends up at about 25 percent revenue growth per year up through 2026, but that's an average. I projected a drop to 35 percent growth rate in 2023, then 28, then 20, and then 17. Now, the average S P 500 stock has averaged a 3.5 percent revenue growth over the last 10 years, and that has corresponded to a multiple of about 1.5 growth.

Stocks in the S P and also outside of the S P, especially in the Nasdaq, have had multiples that stretch all the way to 40, 50, 60, and sometimes even 100 or 200. But you look at the averages for the overall market and you plug in Sofi's numbers proportionately, growth to multiple, and you get a fair value multiple of about 10.67 And now of course we're in the extreme depths of a multiple crunching and recessionary fear period. And until the Fed changes course, which, who the hell knows when that's going to happen, we have to do our best to guesstimate and look at the broader picture. So I went ahead and I used the historical context to fill in different estimates on multiples based on expanding multiples, which we already saw a rapid drop in multiples from 2021 to the end of 2022, and then expanding multiples that go back to near average by 2024 to 2026..

So in totality, what I'm thinking of right now is 1749 year-end price Target 2023, 28.50 in 2024, 4139 in 2025, and 52 31 in 2026.. That's it. Again, let's be realistic: 2022 and 2023 are extremely extremely up in the air and fed dependent. If we had a sizable recession in late 2022 or early 2023, obviously these numbers would be derailed, but the following period should make up for that.

And that's why, if you look at an average trend, we should still be able to hit our 2026 goals. And so anyways, if you're targeting something for so far, you want to give it at least at least until 2024, if not late 2024 at minimum, to really showcase the growth trend and allow capital markets to catch up and stabilize. Right now, it's a flip of a coin where multiples are going to be a year from now, but if you start looking out two, three, or four years and you look at the overall growth trend, I think that you're going to like what you see. These are just my numbers in my forecast.

If tomorrow, the Federal Reserve says that we're going to raise interest rates to 100 percent and the Bonded Administration decides to make a moratorium on every part of the economy, I will revise the price target down to the fair value that a lot of people say is zero dollars. However, based on the information that we have right now and what I see as the current most likely scenario, you're probably looking at numbers that look like this when you're doing your own due diligence on Sofi. My suggestion is to look at how it's doing compared to its competitors, not just the ones that I mentioned, but all of them how it's doing compared to even players in other spaces. In terms of growth rates, member growth, and overall revenue.

I would look at how they're doing in terms of net assets versus the actual price and the market cap of the company, and I would ask yourself the simple question, do they have what it takes to survive whatever bad macro condition we're going to see for the next two years and is the overall trend the overall trend, not just short term setbacks if we get them in the next quarters or next year or whatever, but the overall trend. Is the overall trend going to be upward? If yes, you may want to consider the stock. If not, then definitely avoid it because this is going to be the great reset. Anyways, folks that caps off today's video.

If you have any questions, feel free to reach out to us below or join us on Zip Trader Circle. If you're looking to learn how to trade with our step-by-step lessons, private chat, daily morning briefings as well as our full price target list, I'll put a link to Zip Trader You below coupon code Charlie Fever also. Again, thank you Moomoo for sponsoring today's video. Make sure to get your free stocks down below in the description, terms and conditions apply.

I'll see you in the next video.