Time to Get OUT of SOFI Stock?
Summary
Luke argues that SoFi is a strong investment, directly addressing and refuting four common negative narratives.
Firstly, he counters the claim that SoFi isn't growing, presenting earnings data that shows the company growing at almost 40%. Luke emphasizes that while the stock price might not reflect this immediately, strong earnings growth inevitably leads to fair value over time, recommending tools like Fiscal AI for data analysis.
Secondly, Luke dismisses the idea that SoFi is "dead money," arguing that this perception is solely dependent on an investor's entry price. He illustrates this by comparing an investor who bought at $32 (down over 50%) to one who bought at $4 (up over 300%), showing that generalized comparisons to the S&P 500 without considering individual entry points are irrelevant.
Thirdly, he warns against the "hindsight always picks winners" mentality. Luke uses his own experience with Apple shares, bought in the early 2000s and now up almost 60,000%, to show that even successful investors miss optimal entry points, and focusing on what one "should have bought" is unproductive and unrealistic.
Finally, Luke addresses criticisms regarding share dilution and CEO Anthony Noto. He explains that dilution is a normal and necessary part of growth for early-stage companies, citing historical examples of Apple, Tesla, Google, Amazon, and Meta, all of which experienced significant dilution in their formative years before achieving massive gains. He also defends CEO Noto, stating that criticisms are largely confined to social media, while Noto's management consistently hits or beats projections.
Luke states that SoFi's recent earnings were "great" and superior to the previous quarter. He highlights the management's strength in setting and achieving projections. Despite initial guidance based on two rate cuts, and the Fed now signaling two rate *hikes*, SoFi has confidently *raised* its revenue guidance and expects to meet EPS targets, which Luke sees as a clear indicator of the business's underlying strength and execution.
Luke's personal plan for SoFi is to continue his modified dollar-cost averaging (DCA) strategy. He believes that the market's current lack of "love" for the stock, despite a triple beat and raised guidance, presents a "gift" for long-term investors. Luke expects SoFi to eventually experience significant appreciation, potentially running up to $30-$35, which would represent more than a double up from current levels, akin to Google's earlier growth trajectory. He explicitly states his comfort in allocating "a lot more money" towards SoFi, contrasting its almost 40% growth and strong execution with companies like PayPal, which he describes as a slow turnaround play with single-digit growth.
Mentioned Stocks
Reasoning: Luke references Amazon as an example to illustrate that dilution is a common and often necessary aspect of early-stage growth for businesses. He challenges viewers to examine the dilution history of these companies during their first 10 years or decades, noting that they all experienced massive dilution before eventually bringing their share count down, yet still delivered "hundreds of thousands of percent gains."
Reasoning: Luke references Meta as an example to illustrate that dilution is a common and often necessary aspect of early-stage growth for businesses. He challenges viewers to examine the dilution history of these companies during their first 10 years or decades, noting that they all experienced massive dilution before eventually bringing their share count down, yet still delivered "hundreds of thousands of percent gains."
Reasoning: Luke references Nvidia as an example to illustrate that dilution is a common and often necessary aspect of early-stage growth for businesses. He challenges viewers to examine the dilution history of these companies during their first 10 years or decades, noting that they all experienced massive dilution before eventually bringing their share count down, yet still delivered "hundreds of thousands of percent gains."
Reasoning: Luke strongly defends SoFi against common criticisms: "isn't growing" (earnings show almost 40% growth), "dead money" (depends on entry price; a $4 buy tripled up), "dilution is bad" (common for early growth companies like Apple, Tesla, Google, Amazon, Meta), and "CEO Noto is worst" (Noto consistently hits/beats projections and raised guidance despite Fed rate hike predictions). Luke believes SoFi's earnings were "great" and execution is strong, setting up for big EPS growth in the back half of the year. He plans to continue his modified dollar-cost averaging (DCA) and feels comfortable putting more money into the stock, expecting it to eventually get Wall Street's "love" and potentially reach $30-$35.
Reasoning: Luke mentions Palantir only to say he's "not going to use Palanteer as an example because a lot of folks go, 'Well, it's not going to have a Palanteer style run,' which I agree with." It's used to set a reasonable expectation for SoFi's potential run, suggesting SoFi's run might be less aggressive than Palantir's, but still substantial.
Reasoning: Luke contrasts SoFi's strong execution and almost 40% growth rate with PayPal, which he describes as a "turnaround play" with "super super slow" single-digit growth. He states PayPal was "not executing on a high level," making it an incomparable and less attractive investment than SoFi.
Reasoning: Luke uses Google's historical stock run as a "very very reasonable" example for SoFi's potential, suggesting SoFi could reach around $30-$35 (more than a double up) just as Google had a significant run. He also mentioned Google diluted shares in its early days, supporting his argument that dilution is normal for growth companies.
Reasoning: Luke uses Apple as an example to illustrate the fallacy of "hindsight always picks winners" and to counter the "dilution is bad" narrative. He mentions his own initial Apple shares bought in the early 2000s are up almost 60,000%, but acknowledges he still "missed the bottom by 40%". He also points out that Apple diluted its shares multiple times in its early history, similar to SoFi's current situation, demonstrating that dilution is not inherently bad for a growth company.
Reasoning: Luke references Tesla as an example to illustrate that dilution is a common and often necessary aspect of early-stage growth for businesses. He challenges viewers to examine the dilution history of these companies during their first 10 years or decades, noting that they all experienced massive dilution before eventually bringing their share count down, yet still delivered "hundreds of thousands of percent gains."