Transcription
If you are a SoFi shareholder or if you are a Robin Hood shareholder, beware. You must take your beer goggles off right now. And I am going to discuss both of these stocks, what you should be doing, going over some technical analysis, and a massive update, especially because SoFi is about to have earnings on October 28th and Robin Hood shortly after that.
So, is SoFi set to deliver? Well, I believe the answer is yes. And let's get into my reasoning. So, first of all, my position on SoFi right now, I have several hundred shares or 3,100 shares. I'm up about 33% on the stock and I think SoFi is headed for some really big numbers. Look, the market cap is now 35 billion. I was just covering it when it was 30 billion. So, if you're, you know, watching my videos, you're part of my community, congrats. We put some money in your pocket. So, I'm hoping that you are enjoying that.
So, how exactly does SoFi make money and why is this earnings going to be different? Well, one of the biggest uh segments that I'm looking at is their lending segment, which includes personal, student, and home loans. And this remains one of the main revenue drivers, and it's about 60 to 65% of total income for SoFi. Now, financial services like banking, invest, and credit card also adds user growth. And I'm really looking forward to seeing more information on that from SoFi. You can think of SoFi as a modern bank plus AWS for finance hybrid because they have Galileo and Technus. So that provides uh recurring B2B fees for Sofi. Now the consumer lending fuels near-term cash flow while the tech platform could be scalable backbone for the long term. And I think investors obviously see a massive opportunity in that. And this market cap as you're seeing on the screen right here, I'm going to put a little arrow here. Well, this is nothing compared to what's about to come for SoFi. And if you ask me which segment contributes the most profit margin and what's going to be the most important metric that's going to be announced, well, that's clearly the lending arm because it delivers the highest margin of around 70 to 80% that contributes to profit. But it is very sensitive to interest rates. Okay, that's one of the issues with SoFi. Robin Hood collects all of their money basically through platform, basically through fees, whereas SoFi actually has some rate risk, which is completely fine. And that's why basically conclusion of this video, I like both of these stocks, but I'll get more into the price targets because SoFi has had a really strong first year of gap profitability in the quarter of 2024, right? They now in 2025 are going to be scaling very quickly. And it's going to basically be a show and tell, not a rumor, but show me the story. And investors are going to say, "Hey, we either like these numbers or we don't." I think the numbers are going to come in above expectations. And one thing that I've looked into is loan originations. Now, the fact is that loan originations have slowed slightly from 2023, which was at a high as funding costs rise. But SoFi's bank charter gives it a cheaper deposit funding because they basically get 4% API versus 6 to 8% on the wholesale side. So if you're wondering how sustainable is SoFi's loan growth given interest rates and credit risk trends, well, it's going to be better than competition because they actually have a great way of acquiring customers that deposit funds into SoFi. And don't forget my very favorite metric of absolutely all time for SoFi and why I'm so bullish on it is the cost of acquisition or CAC CAC. Right? So it is estimated to be around $40 to $60 per new user and cross-selling multiple products can push lifetime value to 1,000. So basically every time SoFi acquires a customer, they are paying about 50 bucks and the lifetime value of that customer is 1,000. So, you can pretty much see how SoFi is absolutely printing money and this stock is going to likely go up, especially in the next 12 to 18 months.
Now, I'm not trying to predict the short term because short-term is very difficult. But even in the short term, October 28th, because we're going to get earnings, I can pretty confidently say like 9010 that the stock is likely to have a bit of a runup. Now, on the technical analysis front, you can see how the stock has consistently gone up and the moving average continues to follow. By the way, these indicators are exactly what I look at in my community Mondays and Wednesdays when I do my live coaching call. I'm looking at Bowlinger band analysis. I'm looking at moving averages and I'm also looking at RSI. These are the metrics that I use to understand where a stock is going to head next. And then I trade options based off of these indicators. I like to keep it super simple because I have a lot of beginners joining my community and my goal is to teach a beginner how to become an intermediate and generate the money that they need so they can build wealth and make a really good amount of money.
I wouldn't be surprised to see Robin Hood head towards $33 to $35 per share in the next 1 to 3 months. Now, that is a really fast and short-term rise and that's a pretty big prediction. So, why do I think that's going to happen? Well, the main reason is because of their expansion of option trading. SoFi is rolling out a level one option trading functionality which they just rolled out like three weeks ago. This allows users to zero commission commissionfree excluding regulatory fees, trade options such as cash secured puts and covered calls. So essentially SoFi is now competing with Robin Hood. As more members join to trade options, this is going to give SoFi a data advantage, and them collecting a lot of data is only going to help them launch level two and level three option trading in the future and make a lot of money on their members. Now, option trading is one of the facets basically that I'm super bullish on, but they also have blockchain and crypto that they are also continuing to pretty much develop. they have a partnership with Lightspark and that workflow that they have is basically able to convert USD into Bitcoin for crossborder transfer. So these are more key news and developments that I'm really looking at and during the call I'm going to be very excited if they mention data on the expansion of option trading because that's something that obviously I know a lot about.
So on the business side, I'm really excited to see more information on SoFi and I'm going to be looking forward to understanding their cross-ell flywheel and their ecosystem lock in further. Basically, if you don't know about that, essentially what SoFi does is they continue to develop multi-product users that adopt lots of different products and increase their lifetime value. So it's no longer just a loans business. They are pushing members into credit cards, brokerage, insurance, and much more. This helps the stickiness build within the company and the more products a user has, not only do they drive more revenue for SoFi, they're also less likely to leave to competitors. Unlike many fintexs that rent banking infrastructure, SoFi actually doesn't do that. They push towards owning more pieces of their own stack. So, they don't have to partner with other banks, APIs, compliance layers. They don't have to have all those expenses. Instead, they pretty much own the entire stack, which is what's called vertical integration. This gives them a massive edge, and this is one of the big reasons why as long as there's adoption into their new products, those products are going to be incredibly successful and incredibly profitable.
Now is a really crucial time for you to beware and not to miss out on SoFi's future gains because interest rates as they stay higher. This helps the business in the short term but also in the long term I think momentum is going to continue on SoFi stock and the RSI right now is sitting at 58 which is not that high actually. It's somewhere in between and SoFi is heading up towards the top of the bowlinger band which is traditionally not the best sign and kind of tells you that the stock is slightly overvalued because right now the moving average is 26. That's only a couple of dollars. And what I think will happen is investors are getting basically early. They are frontloading the potential move that's going to happen in SoFi. So I think it's going to break out past Bullinger band. But again that's just my guess in my opinion. I'm not a financial adviser or anything like that and I cannot predict the future. I would say there's a very strong support at $25 per share and my current position on SoFi. I have $26 puts which I think is a really smart strategy to sell puts before earnings in case it does fall down. I'd be more than happy to buy SoFi at $26 per share. Now, I have some in the money covered calls which have not really gone my way which I'm going to have to roll higher in the future.
With that being said, let's move over into Robin Hood because Robin Hood is another stock that I think investors can make an absolute boatload of money on right now. One month, up 9%, 6 months, up a whopping 187%. That is absolutely insane. That's so much money. Now, on November 5th, we get news on Robin Hood. And you know, one of the things that I'm looking out for and one of the questions I ask myself is how exactly does Robin Hood make money across its main segments and how are those going to benefit this earnings quarter specifically? Well, the main segments are trading interest and subscriptions. So, these are really easy to understand and the fact is Robin Hood's revenue mix is roughly 40 45% from net interest income, meaning margin loans and uninvested cash. That's pretty crazy because that means all the cash that we are not using, Robin Hood is using to make money off of. 35% is coming from trading. So basically that's where they pay for order flow, which is essentially taking your data and selling it to other traders. Yes, they do that. So although Robin Hood is free, it's not really free because they're selling our order flow and the rest comes from subscriptions. So, Robin Hood Gold and the credit card that they recently launched, which I don't have myself, but I heard pretty good things about it. Robin Hood is evolving from a free trading app to a mini digital bank and earning more from deposit and yield spread that people actually are not using. So that's a really interesting business model because they don't really have any risk like SoFi, but they are becoming more like SoFi because they are going into businesses that SoFi is in and vice versa. SoFi is going into businesses that Robin Hood is in. So beware that you will miss out on tons of gains in my opinion because both of these companies are copying each other. They're studying each other's playbooks and that is going to be a really big opportunity for both of these companies to add extra revenue. However, it is going to be more competitive.
And that's what kind of got me to the second question I had for myself, which is basically which segment contributes the most profit margin right now because looking at SoFi, that's one. But what is it for Robin Hood? And for Robin Hood, it is interest income. It has the highest margin today, fueled by about 20 billion in customer cash balances, earning about 5% plus rates. Subscriptions from Robin Hood Goal is only5 or 10 bucks a month. But when you have so many users that pay5 or $10 a month, then that is an amazing recurring revenue stream and that's going to push Robin Hood's valuation higher. The next growth frontier is essentially recurring financial utility, getting users to treat Robin Hood like their primary bank and not just a trading app. And I think that's where the opportunity lies and that's what's going to help Robin Hood's valuation push higher.
Other question I had for myself was like, "Hey Henry, do I want to invest in Robin Hood right now because I already have a position essentially. It's at $138 per share. I'm up 10% on the position. I do have some covered calls at 126 and 130. And right now I'm thinking about adding more shares. It only makes up about 6% of my portfolio. I have a 300K position. So I asked myself, hey, do I really see the sustainability in Robin Hood's growth given the current rate environment and user activity trends?" And the fact is that higher interest rates massively boost profits just like it does for SoFi. So trading volumes are flat versus pandemic highs, but crypto volume is pretty good. And Robin Hood is going to make good money off of crypto. So the short-term model is pretty rate dependent, but the long-term sustainability depends really on keeping users active even in sideways market, which is a challenge that SoFi handles better with lending because people have, you know, basically when they lend money, they owe interest. But with Robin Hood, if people are not as active, well, they're not going to make as much money. So, they kind of need us to be more active.
And that brings me to the last point, which is, okay, activity is good, but what does the customer acquisition look like? Like, what is CAC, which is like a business term that I've talked about many times on this channel. And if you're new to this channel, make sure to subscribe. I have experience at Goldman Sachs, various hedge funds. And my goal is just to educate you on option trading. And my community helps you scale your portfolio and build wealth by watching me live trade and has support with me in a one-on-one coaching setting if you like or in a group setting. There's two different options. If you want to learn more about those two options, just visit the first link in the description. For Robin Hood, the cost of acquisition is roughly $20 to $40 for a verified funded user, which is much lower than banks with an estimated amount of like $20 lower than banks. Now, why is that? Well, just I guess it's easier to get verified funded users versus people who are going to deposit their money and ask for lending. It's also because a verified funded user could just deposit a very small amount of money. Now, the LTV for Robin Hood is not as good as SoFi. The LTV is estimated to be between $300 to $600 depending on engagement and gold adoption. So, Robin Hood's biggest LTV unlock isn't really more users. It's deepening monetization per user with products like credit cards, retirement accounts, and recurring investments. So, the thing is SoFi has figured it out whereas Robin Hood has not really figured it out with deepening monetization per user. However, that's okay because they have a lot more users and they have a larger market cap. And that's just kind of like the little difference between having a bank like SoFi versus having a brokerage like Robin Hood. They essentially have a much bigger market cap. Right here, we will see that the market cap is $123 billion, which is multiple times the size of SoFi. And that's just because they have a lot more users. I believe the valuation for Robin Hood is fair, although it's definitely not cheap. And I think that right now is an interesting time on a technical level to look into Robin Hood. If we go to the chart here for multiple reasons, the first reason for investing in Robin Hood is right here. The moving average continues to go up dramatically as Robin Hood rises in valuation. Right now, it has actually come off of its peak of $150 per share. And I can see the stock heading back to its peak of 150. Now, that could happen shortly after earnings. If earnings are pretty much delicious for investors, they will decide that we want a piece of the Robin Hood pie. The RSI sits very similar to SoFi. And essentially, these two stocks do have a decent amount of correlation. What that means is when one stock goes up, the other one goes up as well. So, you wouldn't necessarily want to have 20% of your money in SoFi and 20% of your money in Robin Hood because that would be 40% in somewhat similar financial assets. Instead, what I would recommend or my opinion is having five to 10% of your money in Robin Hood and SoFi. I'm very excited to hold both of these stocks and I think that these two are very good opportunities. I'm planning to trade some more options next week ahead of earnings. And I potentially might even jump into LEAP options, covered calls, and other strategies that I typically don't even cover on this channel. So, if you're interested in any of those, then just shoot me a message, hit me up, and I'm more than happy to give you more information on that. Hope you got a lot of valuable insights and I'll catch you in the next video.