The addition of a bank charter for SoFi only adds to the company’s “flywheel” marketing approach. SoFi uses their UI/UX tools to draw customers into other products within their ecosystem. The addition of bank balances only helps with the add-ons because of the share of wallet already being captured.
SoFi Technologies Inc (NASDAQ: SOFI) advanced over 11% on Wednesday following the comments made by a Jeffries’ analyst. The company initiated their coverage of SoFi with a buy rating and a $25 price target. The comments came on the heels of SoFi’s desire to obtain a national bank charter.
SOFI Option Activity
With any significant option or stock activity, it’s a good thing if it can be tied to a bigger theme or a specific announcement. In the case of SoFi, it was the initiation of coverage with a buy recommendation and the review of the company’s bigger “flywheel” with the addition of a bank charter.
This discussion can’t help but bring to mind scenes from “In Good Company.” The “flywheel” concept was a big part of that rather good movie. The only difference is the product was Crispety Crunch cereal.
Here’s a breakdown of the option activity over the past two days:
- 9/21/21—10,000 24 SEP 21 $15.50 calls mostly BOT @ $0.09 to $0.15
- 9/22/21— 4,000 19 NOV 21 $20 mostly BOT @ $0.69 to $0.82
- 9/22/21— 31,000 24 SEP 21 $17 calls mostly BOT @ $0.05 to $0.36
What began as weekly option activity on Tuesday spilled over into a continuation of the weekly activity but also migrating out to November. This displayed more sustainability in the potential movement in SoFi. The option activity on the weeklies has been faded on most stocks in recent weeks, but the addition of the monthly expiration shows other interests buying the dip on this stock.
SoFi Technicals
Today’s movement carried it through recent resistance near $16 on over double the average volume. The volume backing the movement is representative of the amount of money that is coming into the stock. When you consider the $25 price target by Jeffries, you’ll see that it aligns with the post-IPO highs since last December.
Taking the Fib retracement of the downtrend you can layout key retracement levels at the 38.2%, 50% and 61.8%. Then, by measuring the initial move from August 31 to September 7, you obtain projections at 161.8% and 261.8% levels.
By doing this, you see some confluence near the $18.75 and $20 price levels. Given today’s move, a minimum target of $20 may be required to trade this move directionally.
Conclusion
SoFi’s flywheel hasn’t exactly provided profitability for the company. However, the news is such that it may have the ability to create movement in the underlying that is tradable. The addition of the initiation of coverage, price targets and the expectation of a bank charter makes it a potentially attractive near-term opportunity.
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