SoFi Is Back at $18 and the Bull Case Just Got Stronger
Summary
Couch Investor discusses the implications of the recent FOMC meeting and the new Fed chair, Kevin Walsh, on the stock market, particularly focusing on SoFi and Amazon. He notes that the market is now pricing in at least one rate hike, leading to a "hawkish hold" environment, with the Fed's new end-of-year projections increasing to 3.8% for the fund rate. Couch Investor expresses his approval for Kevin Walsh's proposed modernization of the Fed, including overhauling data collection and moving away from forward guidance, believing that relying on real-time data is more effective than projections based on outdated information. He is unconcerned by potential 25 basis point rate hikes, asserting that long-term company growth is paramount.
Mentioned Stocks
Reasoning: Couch Investor views Amazon as an undervalued "no-brainer" for its expanding total addressable market and significant growth in its custom AI chips business, which has an annual revenue run rate of over $20 billion and is expected to reach $50 billion if standalone. He anticipates Amazon will generate over a trillion dollars in revenue by 2028 with improving margins. He recommends it as a "buy and hold forever" stock, despite any short-term pullbacks, emphasizing its strong business capabilities.
Reasoning: Couch Investor considers SoFi extremely undervalued, projecting it to be worth significantly more than $18 per share in the long term. He argues that SoFi benefits from higher interest rates as a deposit-funded lender, leading to wider net interest margins and reduced competitor refinancing. The business has shown accelerated growth and profitability even with existing high rates, demonstrating resilience. His DCF analysis suggests a probability-weighted price of $25.70 (44.4% upside), with a base case of $42.7 and a bull case exceeding 100% upside. He will continue adding shares due to its cheap valuation.