SoFi Technologies Is Soaring, but Short Sellers See Trouble

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Key Points

• Online banking has taken a big step forward amid higher interest rates.
• SoFi Technologies stock is up over 15% since July 1 but it has caught the interest of short sellers.
• If you’re an growth investor you need to grab a copy of 24/7 Wall Street’s brand-new AI report, “ The Next NVIDIA .” You’ll discover many other stocks that could benefit from supplying NVIDIA and the next wave of growth in AI trends.

Since the Federal Reserve began its interest rate-hiking cycle in March 2022, investors and savers alike have caught notice of how online banks that offer high-yield savings accounts, money market accounts and certificates of deposit were providing yields far and away better than their brick-and-mortar banking counterparts.

One of the biggest players in that space over the past several years has been SoFi Technologies Inc. ( NASDAQ: SOFI ), which offers personal finance services as well as traditional banking services. Founded in 2011, the company's shares have chopped around since going public in 2021. However, since reaching its all-time high of $25.14 on January 29 of that year, they are down more than 70% and despite a 15% gain since July, the have caught the eye of short sellers looking to profit from their ongoing plummet.

Big Promises, Poor Fundamentals

Despite accruing a $7.93 billion market cap and becoming a household name in the online banking space, SoFi Technologies is now heavily shorted. According to Nasdaq.com, short interest has gown to 187 million with 6.5 days to cover. That number of shares sold short equates to 18.60% of the company's 1.01 billion-share public float.

As of July 2024, SoFi Techonologies' price-to-earnings ratio stands at an off-putting -16.6 after it posted just positive earnings just twice in the past 12 quarters. And while analysts' consensus earnings per share for the current quarter stands at 1 cent, that is hardly inspiring investors. Neither is the company's free cash flow, which on a trailing 12 month (TTM) basis, currently stands at -$4.12 billion on TTM revenue of $2.55 billion.

Also over the past 12 months, insiders and institutional investors have vacated their positions in SoFi Technologies. Insider activity has favored sellers (44) over buyers (8) during that time, and institutional ownership is now down to 41.36% with 218 holders offloading 50.823 million shares over the past year.

At the time of writing, shares are trading for $7.52 and are down -22.12% so far in 2024.

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