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The NASDAQ stayed above water in a mixed market, with median prices of homes at record highs.
We ended the day with a mixed market. Both the S&P and DOW indices finished in the red, with the NASDAQ barely finishing above the green.
With uncertain and confusing Fed comments in the past week, investors look for more economic indicators to clarify the market's future. New data from the Commerce Department came out today. It tells us home buying has slowed, while the median price is as high as ever, another victim of supply chain issues and inflation. This serves as a reminder to the financial market that inflation is ever-present, possibly causing investor hesitation today.
Started as a student loan platform, SoFi (SOFI) is now a challenger bank aiming to replace traditional banks with its one-stop-shop consumer finance products.
Today's winner stock of the day is another suggestion by Stock Card’s VIP members. SoFi Technologies (SOFI) is a SPAC IPO that finished Wednesday up by more than 2%. In the past, SoFi was known only for school loan services. With their new CEO Anthony Noto in charge, the business pivoted to create a challenger bank offering a one-stop-shop technical platform for all your financial needs, from investing to loans to financial education, and more.
The company has reported seven quarters of faster year-over-year growth in member base. What distinguishes SoFi from other banks is its ability to acquire users at a much lower cost. Users may join SoFi to trade crypto and then graduate to get a loan or open an account. We've seen a similar low-cost customer acquisition from Square (SQ). With almost no physical presence this new generation bank has much lower operating costs. You can see the evidence of it in its rapidly improving Adjusted EBITDA (Earnings before Interest, Tax, Depreciation, and Amortization).
Despite all positive signs, let's not forget thatSoFi’s plan for future growth relies on generating more revenue from their existing customers down the road. While they want to bring more people into the service, they ideally want to benefit from being a “one-stop-shop” for their paying customers. Upselling more products to the existing base may not be as easy as everybody assumes and end up taking too long or too much.
One thing that makes me worried about SoFi is that it is diversifying to new financial products too fast. Each of the companies product offerings can be an independent company by itself with regulatory challenges and operational complexities. It also makes it hard to understand SoFi's operation well enough to jump in now. I could be regretting it later, but this stock is still a watchlist candidate for me.
Clover Health (CLOV) is slowly gaining ground but has a long way to go to reach its record high.
The second SPAC IPO suggested by VIP users is Clover Health (CLOV). Yesterday, the company saw a 20% jump in its share price, followed by another +9.5% today. Today though, we are stepping back to look at the bigger picture. Relatively speaking, this jump is only a fraction of the ground needing to be recovered from CLOV’s downtrend.
June 8th was the height of the short squeeze craze, with Reddit traders sending the value up to $22 before a massive sell-off led to a drop to $13.85 today. The gains we saw today come from discussions surrounding an SEC filing by the company acknowledging the possibility of a squeeze.
Aside from the short squeeze drama, Clover's product is interesting. It uses data and machine learning to assist physicians to make better decisions when they are diagnosing. The company works with 2K physicians so far. It also uses the same data and AI technology to provide a more accurate and less costly Medicare Advantage health insurance plan in 34 countries and has about 60K users. Of course, the market opportunity in the U.S. The Medicare market is quite large. And, Clover's plan is currently addressing the needs of only 3 million patients. This means there is a large market opportunity, and at the same time, it means Clover still has a lot of work to do to grow and expand its share in the market. With 2K doctors and 60K Medicare Advantage members, it almost feels it was too early for Clover to go public and it still needed more time to establish its business. But, I guess, that's what SPAC mergers are for. You go public and get access to capital much sooner than a traditional IPO.
For me, it just feels too early to assume Clover can take over shares from the likes of UnitedHealth (UNH). If it does, it would be an excellent investment for a long time. I rather wait a bit to let Clover grow a bit more before jumping in.
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