Stock Market

There Are Catalysts for SoFi Technologies Stock, but Not Good Ones

San Francisco-headquartered neo-banking firm SoFi Technologies (NASDAQ:SOFI) is one of today’s most interesting fintech firms. However, Mad Money host Jim Cramer can’t seem to find a catalyst to recommend SOFI stock to investors. There are actually notable events concerning SoFi, including the approval of a reverse share split and the possibility of a $1 billion stock resale. These aren’t necessarily positive catalysts, though.

In a “lightning round” from this month, Cramer provided a characteristically concise assessment of SoFi. “I do not understand it. It’s at $5. That makes no sense to me…. That said, I have no catalyst to recommend the stock,” he said.

Perhaps we shouldn’t be surprised to see Cramer running hot and then cold on SoFi in just a few sentences. His manic personality is entertaining, no doubt, but investors must assess SoFi for themselves. At the end of the day, they may decide that numerous catalysts do exist, but they’re not overwhelmingly bullish for SoFi.

SOFI SoFi Technologies $6.43

What’s Happening with SOFI Stock?

If any company could use a catalyst or two, it’s definitely SoFi Technologies. Distressingly, SOFI stock traded for $23 per share in November of last year, only to fall to $5 and change in early July this year. Sure, the stock rebounded to $6 recently, but the buyers still have a lot of catching up to do.

On a trailing 12-month basis, SoFi has had -65 cents in earnings per share (EPS), meaning the company hasn’t been profitable. This brings us to SoFi’s first upcoming potential catalyst, though. Specifically, the company will report its second-quarter 2022 earnings results on Aug. 2.

Unfortunately, as InvestorPlace contributor Eddie Pan explained, “the consensus estimate for earnings per share (EPS) is a loss of 13 cents.” In other words, SoFi will almost certainly continue to report an unprofitable profile.

Reverse Splitting and Reselling

Unless there’s a positive earnings surprise on Aug. 2, investors will have to accept that SoFi is operating in the red. That’s not the only development that SOFI stock traders must contend with, though.

Pan also reported that SoFi’s shareholders approved a measure that would allow the company’s board to enact a reverse share split. Currently, there’s no confirmation that SoFi’s board will follow through with a reverse split.

Companies might cite various reasons for considering a stock split, but let’s be honest. SOFI stock tanked and recently threatened to go under $5. A reverse share split could increase the stock’s price and make SoFi appear more credible as a business. It’s an artificial way to build credibility, though.

Then, there’s the news that SoFi filed forms to the U.S. Securities and Exchange Commission (SEC) detailing a $1 billion share resale. SoFi won’t issue new stock shares, but some existing shareholders will resell their shares.

Thankfully, there’s no share dilution threat here. However, as Pan put it, “the offering raises concerns on why the company needs the additional capital in the first place.” Besides, if SOFI stock had strong potential for price appreciation, why would some existing shareholders want to resell their shares?

What You Can Do Now

Cramer’s rapid-fire assessment of SoFi may be confusing to some folks. Does he feel that a $5 share price is too low? If so, then why doesn’t Cramer see any catalysts for the company?

Rather than parse Cramer’s commentary, it’s more constructive to weigh SoFi’s recent and upcoming developments and form your own conclusion. That said, Cramer may have a valid point.

There’s a lot going on that could impact the SOFI stock price, but it’s hard to identify anything overwhelmingly positive. Consequently, the best strategy is to wait and keep an eye out for a clear-cut turnaround signal for SoFi.

On the date of publication, David Moadel did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the Publishing Guidelines.

David Moadel has provided compelling content – and crossed the occasional line – on behalf of Motley Fool, Crush the Street, Market Realist, TalkMarkets, TipRanks, Benzinga, and (of course) He also serves as the chief analyst and market researcher for Portfolio Wealth Global and hosts the popular financial YouTube channel Looking at the Markets.

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