I remember CEO Noto saying SOFI is directing funds toward growth now, but that enough would be shifted to earnings by 2023 Q4 to get them profitable. Not exactly, but it was something along those lines. So I think there is some wiggle room in allocation of funds, to drive profitability. I've no idea how that would happen, though, or if it would even be necessary. Thank you for the analysis.
I think it's the right call. I usually care less about profitability now for investing reasons, but I've come to realize that they need profitability because without it their capital ratio limits will deter long-term growth. They need to have positive GAAP earnings so that they can have retained earnings to improve their capital ratios and have flexibility to hold or sell to maximize profits.
Thank you for the explanation. Do you think profitability, and share price going above $10 (for now) for a few months, will bring more institutional investment? I'd like to see that, although options can be fun to trade.
I do think profitability will probably bring more institutional investment. A year later they'll probably end up in the S&P 500 as long as they hit the market cap limit (they'd need to be somewhere around $14 by then to qualify I believe). That would also bring greater investment from institutions.
Indeed, 2024 is going to be a big year for SOFI as the institutional money will start to follow all the attention that SOFI has been getting as it becomes profitable and is included in indexes which will rebalance the cap table which is currently retail heavy with a volatile share price.
I remember CEO Noto saying SOFI is directing funds toward growth now, but that enough would be shifted to earnings by 2023 Q4 to get them profitable. Not exactly, but it was something along those lines. So I think there is some wiggle room in allocation of funds, to drive profitability. I've no idea how that would happen, though, or if it would even be necessary. Thank you for the analysis.
I think it's the right call. I usually care less about profitability now for investing reasons, but I've come to realize that they need profitability because without it their capital ratio limits will deter long-term growth. They need to have positive GAAP earnings so that they can have retained earnings to improve their capital ratios and have flexibility to hold or sell to maximize profits.
Thank you for the explanation. Do you think profitability, and share price going above $10 (for now) for a few months, will bring more institutional investment? I'd like to see that, although options can be fun to trade.
I do think profitability will probably bring more institutional investment. A year later they'll probably end up in the S&P 500 as long as they hit the market cap limit (they'd need to be somewhere around $14 by then to qualify I believe). That would also bring greater investment from institutions.
Indeed, 2024 is going to be a big year for SOFI as the institutional money will start to follow all the attention that SOFI has been getting as it becomes profitable and is included in indexes which will rebalance the cap table which is currently retail heavy with a volatile share price.