Is this SPAC a buy?
It’s time to break down what was once a very popular SPAC. Here is the break down of $SOFI, otherwise known as SoFi.
Current Price: $22.65
52/Wk High: $28.26
52/Wk Low: $10.10
Market Cap: $2.0 Billion
Read below for the break down!
SoFi ($SOFI) is an up and coming digital financial services platform that assists customers in saving for retirement, paying down debt, creating a financial safety net, investing, and so much more.
Previously, $SOFI was a blank check company listed under Social Capital Hedosophia Holdings Corp. V ($IPOE), a blank check company (SPAC) that was led by Chamath Palihapitiya.
Recently, Social Capital and SoFi completed merger plans (Hence the SOFI ticker) in a sizable private investment in public equity (PIPE) deal that will provide up to $2.4 billion in cash and guarantees a fully committed PIPE of $1.2 billion.
On a final note, the merger values SoFi at a considerable equity value of $8.65 billion. Management was upbeat about the deal.
“The new investments and our partnership with Social Capital Hedosophia signify the confidence in our strategy, the momentum in our business, as well as the significant growth opportunity ahead of us,” CEO Anthony Noto said.
Exploring SoFi’s management team, the company is led by CEO Anthony Noto. Prior to joining SoFi, Noto was COO of Twitter since 2016 and CFO since 2014. Furthermore, SoFi’s management team boasts a multitude of well qualified members with experience from Uber, Goldman Sachs, Procter & Gamble, and more.
Digging into the numbers, SoFi has been consistently posting strong growth. In the most recent earnings report, Q1 2021, SoFi delivered net revenues of $216.044 million, representing a sizable 151% jump on a year-over-year basis.
Shifting into EBITDA, adjusted EBITDA totaled $4.132 million in Q1, representing a strong $70 million improvement on a year-over-year basis. For reference, the Q1 2020 adjusted EBITDA was $-66.152 million.
Breaking down profits by segment, the lending segment turned out a solid contribution profit of $87.686 million, representing a solid improvement over the minimal $4.095 million contribution profit in Q1 2020.
Furthermore, the Technology Platform segment delivered a contribution profit of $15.685 million. On a year-over-year basis, this is a significant improvement over the Q1 2020 level of $997,000.
Round out contribution profit, the financial services segment turned out $-35.519 million in contribution profit, representing a declining contribution profit over the Q1 2020 level of $-26.983 million.
On the members front, SoFi continues to see strong growth. Overall members totaled 2.281 million for Q1 2021, representing a sizable 110% increase over the Q1 2020 total members level of 1.086 million.
As for products, overall products grew by 120.8% year-over-year, bringing total products to 3.185 million. Do note, total products is defined as the total aggregate number of lending and financial services products that SoFi members have selected.
Looking to the future, management is upbeat and expects adjusted net revenue to land within a range of $215 million to $220 million in Q2 2021. If the Q2 targets are met, revenues will have grown 58% to 61% on a year-over year basis.
As for quarterly EBITDA, Q2 adjusted EBITDA is projected to land within a range of $-8 million to $-2 million, while EBITDA margin is expected to be -4% to 1%.
Rounding out guidance, leadership is expecting FY 2021 revenues to total $980 million, which would represent strong 58% revenues growth on a year-over-year basis. Finally, FY 2021 contribution profit is expected to land around $266 million.
The big money is less involved, with just 23.40% of SoFi being owned by institutions. Top holders include Ivy Investment Management, Franklin Advisers, and Gilder Gagnon Howe & Co.
On the risks front, Sofi faces strong competition, with many services matching that of Paypal ($PYPL) and Square ($SQ), leaving investors wondering which is the better buy.
In short, SoFi is a solid company with an expanding user base and quickly improving financials but faces a tough road ahead that could be very profitable.
EAT - SLEEP - PROFIT
Disclaimer: This is not direct financial information, simply an opinion based on independent research.