SoFi Growth Strategy - SOFI Stock Analysis

all in all I think we're setting up for a pretty strong uh back half of the year in 2025 if we get the right right uh fiscal policy that is SOI CEO Anthony notto commenting on the potential rate Cuts in the back half of the year and now a little over a month after that interview we have gotten the announcement from the FED that they are looking to lower rates so in this video we are going to discuss what a potential rate cut would mean for sofi's business if you enjoyed the video drop a like down below and if you want to see more videos like this one make sure to subscribe a little over a week ago the FED came through and announced that they are shifting their policies to potentially look at reducing rates and this has got the market very excited and it's beginning to price in rate Cuts as early as the next Federal Reserve meeting on September 18th currently the FED funds rate is sitting at 5.33% and it's been held constant there since August of 2023 there are two things that have concerned the markets over the last year the biggest one being the fact that the rate is sitting at 5.33% which is the highest we have seen since right before the Great Recession the second big concern for investors has been the rate at which the FED increased interest rates in February of 2022 rates were sitting near zero however by the end of the year they had reached 4.1% and that is the fastest we have seen the FED increase interest rates in recent history back in 2015 they went from a .1% interest rate up to a 2.4% interest rate over 3 years and even if we go back to 2004 they went from a 1% interest rate up to a 5% interest rate however that was also over a longer time period of 2 years because of how fast the FED has changed their rates there have been a lot of question marks around how this will affect the broader economy specifically the markets and even the FED have been paying a lot of attention to unemployment Loy M rates we can see here that unemployment has kind of ticked up in the last year or so it's currently sitting around 4.3% however last July it was sitting around 3.5% so we've seen a steady increase in unemployment and it's now sitting at a rate that we haven't seen since 2017 other than the pandemic which the big concern right now for investors and the FED is that unemployment could shoot up in a major way keep in mind that a lot of these factors trail behind one another so even though the FED has increased interest rates significantly and we saw them hold constant at this 5.3% it will take a while for that to trickle down to the rest of the economy and ultimately affect unemployment rates so the big concern right now is that we could see this dramatically shoot up and that's why the FED is repositioning to potentially lower interest rates to get ahead of that and one of the companies that's best positioned to capitalize on the lowering of Interest rates is Sofi Technologies here today we saw the stock move up 7.2% and over the course of the last week it's up almost 12% and the reason that Sofi is so well positioned to capitalize on the lowering of interest rates is because of how they have strategically position their business over the course of the last year they have focused a lot of attention on their invest and banking businesses and growing out their members in those areas and over the next year they're planning to focus a lot lot more on their lending business and here is Anthony notto the CEO of Sofi talking about that strategic approach sure as we came into 20 uh 24 we there was a view that actually rates would be cut four or five times and we believed that for rates to be cut that frequently there would have to be a recession or some type of underling problem um it turns out we'll get one to two rate cuts which is where we've been positioned um and as we thought about the environment and thought about how much we invested in our financial services business our Sofi money product our Sofi vest product our credit card product as well as our technology platform we had an opportunity to drive really strong growth there at 50% and really pull back in the lending business to be more conservative to wait to see where the economy shakes out where interest rates shake out and now we're coming into a picture where that's a lot clearer so uh We've delivered really strong growth without really using the Ling business to help drive it and now we're in a position where uh as we go into 2025 to use both and this has been a very strategic decision from Sofi because currently as of Q Q2 of 2024 they're sitting at 8.7 million members that is up 41% year-over-year and if we go back to Q2 of 2022 they were sitting at 4.3 million members so they have over doubled their members in the course of the last 2 years and ultimately what that has done for them is allows for them to sell lending products to a lot larger base of customers they have gained all these new people into their atmosphere into the ecosystem that is so Sofi and ultimately they can convert them over to high margin products such as lending and the huge opportunity for Sofi is around consumers refinancing their debt on sofi's platform here we could see the 30-year fixed rate mortgage it's the highest we have seen since 2007 and right now if you have bought a home in the last 2 years you're basically sitting at interest rates that are around where the current rate is at and what people tend to do is they follow the rules of thumb where interest rates need to drop by about 1% for it to be worth it to refinance your home so right now really the only people who have any potential of refinancing their debt are people who bought in November of 2023 and that's when rates were sitting around 8% so we've seen them drop from there however the vast majority of people who have bought over the course of the last 2 years really don't see the opportunity yet to start refinancing their mortgage but if we start to see interest rates drop in a meaningful way we should start seeing a lot of people looking to refinance their mortgages and ultimately this is also true for car loans which is something that Sofi offers as well right now car loans are at interest rates between 7 and 8% keep in mind that even before the pandemic interest rates were sitting around 4 1.2% for auto loans so they are significantly higher than we have seen them in recent history so if we think about the strategy that Sofi has had over the last 2 years it has been played out very very nicely they have focused a lot of attention in the last year or so on their invest and banking industry what this ultimately has done for them is it's got customers in the door they have increased their interest rates on their high yield savings accounts to offer people more money to move their money out of traditional banking accounts where you're getting point0 1% interest rates to their bank accounts where they're offering four plus perc interest rates so overall that has been a very smart move for Sofi to get people into their ecosystem now what they have to do is they have to execute on getting those customers to use some of their lending products like refinancing their mortgage whatever personal loans they need for potentially buying a new vehicle and then even student loans or student loan refinancing so the whole for investors is that this converts to better numbers on their top and bottom line in the shortterm I don't expect this to have a massive effect for the reason like we talked about where we need to see lower interest rates by around 1% for a lot of people to look to refinance significant things like their mortgages so for September right now analysts have an average EPS estimate of around 4 cents I think this is probably reasonable we could potentially see it come in maybe a little bit lower but probably around that 2 to 5 Cent range however what gets very interesting is when we're talking about 2025 numbers right now analysts have an average EPS estimate of 26 C the low estimate is sitting at 11 cents and the high estimate is sitting at 36 C as of right now we have seen sofi's average EPS estimate go from 24 cents 30 days ago to 26 Cents currently so there's a 2% gain here that we' have seen however this likely isn't pricing in a lot of these rate cuts and it really is dependent on how much the FED ends up deciding they want to cut rates if we see mult mle Cuts here before the end of the year that could have a good impact on sofi's business in 2025 and then the same thing is true throughout 2025 if we see multiple Cuts especially on the first half of the year that could really drive up a lot of these numbers for 2025 personally I am a shareholder of Sofi Technologies so do not buy a company just because I talked about it here on YouTube I personally believe in the company where it's headed I think they're in a very good position and they've been very strategic over the last few years on what they focus on and I think that's going to shift here in the next year to focus a little bit more on their lending business and that should have a big impact overall on the fundamentals and the numbers behind the company but that's just my opinion don't buy it just because I talked about it make sure you are doing your own research looking into companies that meet your risk tolerance as well as your time Horizon and I hope you enjoyed the video if you did drop a like down below and if you want to see more videos like this one make sure to subscribe and as always guys have a wonderful rest of your day and for the joke of the day what do you call someone who won't stick to their diet check the comments down below for the answer thanks for watching