Okay folks, so we got to give a violent update on the market and then I want to discuss with you one stock that is very, very close to 52 week lows. In fact, just hit it a couple days ago and I want to have a conversation about it. I want to run through the business model, the numbers, and what I see is a fair value for the stock. Jerome Small cap hating Powwow may be very, very scary for the growth sector right now, but over the long run companies that report insane beats on earnings and revenue are going to end up shining.

Also, before we get into it, I do want to remind you that our goodbye 2021 year end sale on Ziptrader you will be expiring on Friday. So if you would like to lock in lifetime access to our step-by-step lessons, our private chat, our daily morning briefings, and of course our price targets. Well, I'll go ahead and put a link to Zip Trader you below. Okay, Marquette to somewhat of a decent day.

I mean, maybe decent is too strong a word, but you had the major indices up market overall Looking like a stale smoothie, but hey, there was a little bit of greeny green crypto. Seeing some inflows today you had the sheep up on some Robin Hood listing rumors. One of the best days for the sheep in a while. But the big story today, of course, was that Cpi report totality.

You had pricing pressures pick up another 0.5 for a total of 7 for 2021, which was about what the market was expecting. perhaps slightly tamer than what the market was expecting. By now, nature is a 0.5 increase in a month. A good report, but it does continue the downward trend that we've had in pricing pressure increases since October.

That's not saying that inflationary pressures are going down, but rather saying that the pace at which they're rising is going down. Obviously, a lot of the four or five rate hike prediction folks were banking on these numbers continuing to spiral out of control, but we are now in the second month of a consistent downtrend, so that's at least a welcome sight. In total, the big takeaway of this report is that energy prices in the energy sector dropped, which brought down the averages and brought down some of the pricing pressures in each other line item you had used car and trucks being the hottest pricing pressure increase month over month, and you've also had some consistent pricing pressures from shelter. This in totality was a red hot inflation report, but by several stretches you are seeing some calming down of pricing pressure acceleration.

Seven percent of the year is horrible. It's terrible. It's a disaster, but there is some reason to be helpful when you look at this report. Now if I want to go ahead and break the little hope fairy, what I will say is that again, energy prices motivated this down.

But if you pull up energy prices for January so far and since December ended, you know whether you're looking at natural gas, different contracts for crude or consumer gasoline prices. Most had gone up throughout December, but really accelerated towards the end of December into January. So a lot of that pricing decrease that we saw in December that motivated the Cpi downwards isn't going to be there. It's going to be doing the opposite in the January report.

Okay, but anyways, I want to go ahead and bring your attention over to Sophie. So far has been beat down recently to new 52-week lows, and it's hovering in that general region now. I know what you're thinking. Charlie, would you stop talking about growth Stocks.

I read on Cnbc that now is the time to sell out of all the growth stocks. Make sure you're selling them at new lows so that you can go and take that capital and go buy mega caps at new highs. That's the way to do it. They say, well, maybe that'll work fine, but when you're talking about getting value for your dollar and you're looking at a high conviction play that's at a new 52-week low, well, it's time to really start having a conversation about it.

Now, if you're going to make an argument for the value of Cell Phi, there's really three different grounds that you need to stand on: Number one: The lending side. they're lending products. Number two, the financial services side their financial services umbrella of their suite of products. in that space, and then finally, their tech platform, Galileo, which they lease out to fintech firms.

Let's start with the lovely lending. So London forms the backbone of good old Sofi, and it has consistently ticked up quarter over quarter every quarter since Q1 of 2019.. what kind of lending do they provide? you may ask? Well, thank you for the inquisitive questions. Well, personal loans, credit card consolidation, mortgages, home equity lines, auto loans, small business loans, pretty much every type of loan you can think of.

But if you look at the balance sheet, student loans are the biggest type of lending they do. With 1.9 billion in student loans, then you have personal loans just behind it at 1.755 billion. Now, arguably, their student loan segment right now is actually weighing them down quite a bit because the government keeps pausing student loan repayments, which obviously is great for borrowers, but not so good for lenders. but eventually probably Q3 or Q4 that will end.

Maybe they'll wait till after the midterm elections? We'll see. We were originally expecting them to end this in January like they originally had stated, but now they're delaying it. We'll see what ends up happening. But the point is, at the end of the day, you're going to have a lot of people that are incentivized to refinance.

their student loans get the best rate appropriate Now, while rates are low, and so far, I may enjoy a lot of People going and refinancing and switching over to them trying to get the most competitive rates. It's also true that lenders benefit from rising interest rates as long as you have a strong enough economy that can afford the interest rates. Now going over to financial services, we are in this world where everybody and their mother wants to get into the personal finance space. Checking accounts, savings accounts, credit cards, debit cards, investment accounts, personal insurance, you name it.

But just because there's a lot of competition, doesn't mean that Sofa isn't doing a good job at beating the competition. And if you look at their trajectory in the financial services space, it's been very, very successful. You're going from 107 000 financial service products in 2019 to 3.2 million at the most recent report. That's a substantial uptick in such a short amount of time, and the reason is because so far is adding members like crazy.

The recent three-quarters saw 110 growth, 113 growth, and then 96 growth consecutively. There's not that many businesses out there that hover around 100 percent user growth quarter over quarter consistently. There's this bare narrative about so far that all this rising competition is stealing members away from them, but I would argue that they're the competition that is stealing members away from everybody else. And obviously excitement aside, we do have to make sure that this trend continues in future earnings reports, but so far it's alive and it's well.

Next, we got to talk about one of Sofi's least understood assets. In 2020, Selfie acquired Galileo and has since accelerated its growth rate in terms of new accounts added by quite a bit. Galileo serves Fintech companies that want to create their own payment solutions. For example, they offer card issuing services, digital banking programs, payment processing, specifically tailored platforms to run your firm.

They offer some big niche solutions as well, such as Galileo Cryptocurrency, which helps companies that want to leverage cryptocurrency in their business. They offer a lot of platforms to fintech companies that would take a very, very long time to build from scratch if the fintech companies that are using them wanted to. so they go to Galileo to do it for them. What about Proof of concept? Who uses Galileo? Well, they report that six Galileo clients made the list of the world's 10 most valuable Challenger banks.

Robin Hood uses Galileo, Bitpay, a number of remittance platforms Samsung, Mastercard, Pay safe Of course, Sofi itself uses Galileo, so you have that built-in customer. This, in my opinion, is very, very smart because not only does Sofi itself get to go and dominate the industry, but the parts of the industry where it can't seem to grasp market share from these other fintech firms it could still profit off of and benefit from by selling platforms to fintech companies that can and are so you get diversification. You have not just Sofi, but you also have the success of these other fintech companies like Robinhood. It's an interesting hedge against encroaching competition.

Lastly, of course, before we talk about numbers, I do have to mention the Sofi Bank Charter. Sofi is in the process of getting the bank charter via acquisition. There's a lot of different ways that they could achieve that bank charter if the acquisition method doesn't work. but at the end of the day they're after a bank charter, and when they get the bank charter, it'll allow them to offer loans at more competitive rates, keep more of their revenue, improve their revenues by being more competitive, and overall provide a lot more shareholder value, so I'm looking forward to that.

Okay, now that leads us to the good stuff: the number. So in order to get a semblance of what Sofi should be worth as it expands, I put together my expected revenue trajectory. Very, very rough numbers, but I think that these are good estimates. Now keep in mind that from 2018 to 2021, Sofa's business model goes from jumping from 241 million in annual adjusted net revenues to 912 million and their full year 2021 guidance was just over a billion.

and that hasn't been finalized yet because we don't have the next quarter's earnings. But let's just build from that. That's the information we have at this point. So let's say their revenue growth slows down and you get maybe a 30 growth in revenue per year for the next three years, and then 25 in 2025 and 20 in 2026..

What do the numbers come out to be? Well, assuming some constant dilution, more share offerings year over year. if we stay at the multiple we're at today, which is 11x sales, which currently is peak, Fear for monetary policy doesn't mean that fear can't get even higher. But right now at peak fear in terms of a multiple crunch, we're at 11x sales. But here's the thing.

when you're valuing a company, you're also valuing how much that company can expand. In the upcoming years, you're trying to make a trajectory projection on revenue growth. So if you're setting a price target, you want to set your price target to correspond to your estimated revenue. And if you use year end 2022 revenue and it hits 1.3 billion, your value under the current price multiple is 17.74 But under a fair value multiple it would be 24 19..

Now, 2023, I would argue, is the year that you want to use for your analysis purposes. This is the year where every business part of Sofi is completely in working order. You don't have the student loan phrases you hopefully have some stabling out of monetary policy, but also some higher interest rates that lend well to Sofie's lending. And hopefully that bank charter will start playing a huge role that year as well.

Well, at that point, I would start taking very, very seriously the fair value in 2023, which is about 31 dollars and 14 cents. That is what I would say. If you're looking at Sofi is a fair value for it, but this is what I think is going to happen based on the market condition that we find ourselves in. I think you're going to continue to get maybe for a month or two some more of this multiple crunching.

You're gonna have people looking at these inflation reports looking at what the Fed's saying and then assuming a lot worse of the situation and that's going to cause this to get crunched more than it should in terms of a multiple. Then you're going to have this environment where now you're actually getting the rate hikes. We're not getting as many rate hikes as expected, people over factored in inflation concerns, inflation starts picking down again. Then all of a sudden you've created this foundation where sofa has a lot of room to run to get back to a fair multiple.

But it's also in a situation where revenue is going up quarter over quarter in a massive, massive way, and you're starting to get some positive catalysts for Sofi, like say, a bank chart. Now if you are in Zip creator you, you've known that my price target on so far is 27, which I set as a healthy middle ground between my estimated 2022 fair value and estimated 2023 fair value. But the longer that you look out and the longer you adjust your time horizon, the less risky Sofa is. Those are just my thoughts on Sofi stock.

You may notice that my sofa videos aren't really coincidental. Last time I made an in-depth video on Sofi was last time it hit a new 52-week low and afterwards it went on to this massive massive risk on period where it went up dramatically and then obviously since then we've gotten back into a massive risk off period and it's gone down again. But the thing is that the way that I valued it back then is really very, very similar to how I'm valuing it right now. I'm looking at it as a much better deal in the next couple of years, and I'm also acknowledging the reasons that it's beat down because of monetary policy crunches at the end of the day.

I can't tell you what Jerome Powell is going to do next or where the Cpi index is going to go and how that's going to impact whether people want to go risk on or risk off. I didn't know that that massive risk on rally was coming after I recommended it back in September or August, but I did know that it was very, very undervalued based on my own research, so I was able to say hey, yeah, it's at a 52-week low. Makes a lot of sense as a buy similar right now. Hey, this could go down more, but in my view, based on the numbers that they're going to be doing, it's still a no Bs buy at these prices.

If Jerome Powell raises interest rates to five to ten percent tomorrow, would this become a penny stock instantly overnight? Absolutely. Would most mega stocks go into a deep deep recession? Absolutely. But over the long run, if you're going to look at this from a buying conviction standpoint, actually buying businesses at what is a cheap price and looking at the longer term trend usually pays off very, very well. And that's how I base my arguments from high conviction standpoints.

Anyways, folks that caps off this video. If you have any questions, feel free to reach out to us below or join us on Ziptrader Circle. This video is sponsored by the lovely gentleman over at Ziptraderu. Our Goodbye 2021 coupon code and sale will be expiring on Friday.

so if you do want to get 28 off before checkout and lock in lifetime access to our private chat, our daily morning briefings, our full price target list, as well as of course our step-by-step lessons. well make sure to check out the link below before Friday. Anyways, folks that caps off the video have a good one. I'll see you in the next video.