For the second straight week, the leading indexes went in vastly different directions as the S&P 500 fell 0.6%, the Dow lost 1.9%, and the Nasdaq gained 1%.
The Stock – SoFi Technologies (SOFI)
SoFi is a tech-savvy lender that targets young, high-income individuals who aren’t drawn to work with a traditional bank. It’s purely a digital business – no brick and mortar here – which isn’t unusual these days. But what makes SoFi unique is the comprehensiveness of its offerings, ranging from student loans to fractional IPO share offerings to estate planning and much more.
SoFi has had success partnering with large, more traditional banks – it recently began offering robo-advisor investment products with BlackRock, giving consumers access to the huge asset manager’s funds without the minimums BlackRock typically demands. The ability to originate loans in partnership with other firms means SoFi makes money that isn’t limited by its capital base; its tech edge is important, allowing it to offer products relatively cheaply while still making money with improving margins as the business grows, and the improving financial environment (customer delinquencies are dipping while lower rates improve volumes) is also helping.
In the third quarter, SoFi posted $689 million in net revenue, up 30% over the prior-year period, with net income of $0.05 a share, the fourth straight quarter in the black. Underneath the hood, things look even better, with net revenue per customer (adjusted for the number of products each client has) rising more than 50% to $81 a year. There remains plenty of runway for growth – SoFi’s credit card business is relatively small with 300,000 customers, for one, and the business is seeing increasing rates of customers using more than one financial product.
Full-year 2024 should see revenue up 22% to $2.55 billion. Management hasn’t guided 2025 but sees the positive trends in delinquency rates and loan originations continuing—Wall Street projects $3 billion in 2025 revenue with $0.28 earnings per share, more than double this year’s likely tally.
Technical Analysis
SOFI came public in 2020, was destroyed in the bear market and spent a couple of years in single-digit territory, building a bottom until perception changed. And it did in October, when shares moved above low-level resistance early in the month and just kept going, easily taking out major resistance in the 10 to 11 area a couple of weeks later and zooming above 16 to end November. This month has seen a rest, but SOFI has given up zero ground and actually nosed to a new high today on light volume. Stop – 13.3
The Covered Call Trade
Buy SoFi (SOFI) Stock at 16.5, Sell to Open January 17 Strike Calls (exp. 1/17/2025) for $1, or a Net Price of 15.5 or less
Static Return: $100 per covered call (6.45%)
Breakeven: 15.5
Covered Call Return (if assigned): $150 per covered call (9.67%)
Please note, the stock and options prices will be moving throughout the day, so these prices are simply an approximation of prices that you should be able to achieve.
However, the important component of this equation is that the stock price paid, minus the premium received via the call sale, equals the Net Price, or 15.5 or less. (In this case 16.5 minus 1 = 15.5. Or another example is you could pay 16.40 for the stock and sell the call for 0.90, which also equals 15.5.)
For every 100 shares of stock you buy, you can sell 1 call. For every 200 shares of stock you buy, you can sell 2 calls. And so on …
Open Positions
| Stock Name and Symbol | Price Bought | Current Stock Price | Stop | Option - Price of Call Sold | Current Option Price |
| Toast (TOST) | 38.7 | 38.5 | 30.5 | December 38 -- $2.45 | $1.00 |
| Norwegian Cruise Line (NCLH) | 25.8 | 26.5 | 22.5 | December 26 -- $1.25 | $0.80 |
| Kyndryl (KD) | 33.75 | 35.5 | 27.5 | December 34 -- $0.95 | $1.50 |
| American Airlines (AAL) | 17.8 | 16.4 | 14.4 | January 18 -- $0.90 | $0.30 |
The next Cabot Profit Booster issue will be published on December 24, 2024.
Copyright © 2024. All rights reserved. Copying or electronic transmission of this information without permission is a violation of copyright law. For the protection of our subscribers, copyright violations will result in immediate termination of all subscriptions without refund. Disclosures: Cabot Wealth Network exists to serve you, our readers. We derive 100% of our revenue, or close to it, from selling subscriptions to our publications. Neither Cabot Wealth Network nor our employees are compensated in any way by the companies whose stocks we recommend or providers of associated financial services. Employees of Cabot Wealth Network may own some of the stocks recommended by our advisory services. Disclaimer: Sources of information are believed to be reliable but they are not guaranteed to be complete or error-free. Recommendations, opinions or suggestions are given with the understanding that subscribers acting on information assume all risks involved. Buy/Sell Recommendations: are made in regular issues, updates, or alerts by email and on the private subscriber website. Subscribers agree to adhere to all terms and conditions which can be found on CabotWealth.com and are subject to change. Violations will result in termination of all subscriptions without refund in addition to any civil and criminal penalties available under the law.
