Why I’m $1.8 Million into THESE 2 Stocks

hey everyone kevin here i've been

waiting for a little bit of an intraday

dip on some of my favorite fintechs and

today is quite frankly the perfect day

to make a video about my favorite

fintechs so jp morgan yesterday

attributed a lot of weakness in their

credit card business to rising costs for

marketing and promotions because their

competition has gotten really intense

and they specifically singled out

wanting to try to make sure they compete

with debit card offerings and other

offerings from buy now pay later

platforms like a firm

yesterday we saw companies like amex

capital one synchrony discover financial

all drop two and a half to three percent

visa was down almost three quarters of a

percent and folks

where's the money been going well a lot

of it has been going to companies like

sofi and affirm and in this video i want

to just give you a quick little primer

on these companies along with some

interesting insights in terms of why

personally i'm very excited about these

companies i'll also talk to you about

some of my price projections and and

sort of where i think the right value is

for these stocks so that way you can

keep them on your radar but we'll talk

about that in a moment for now let's get

into a background on sofi affirm and

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them or right when i buy them make sure

to check out the stocks and psychology

of money group for example with a firm

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range we did private course member live

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made the move when i made the move after

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buy now pay later let's talk about this

so there's a lot of competition in the

buy now pay later space

we know this a lot of folks like to say

that a company like a farm which does

buy now pay later which is where you can

go to like target.com and basically pay

for a stroller over 12 months instead of

paying for it right away

a lot of folks say ah these companies

have little to no moat and it makes

sense because quite frankly it probably

wouldn't be that hard for retailers to

just do buy now pay later style layaway

like they previously have before

themselves

or for other credit card companies and

merchants to offer buy now pay later as

well but one of the things that makes a

firm unique is that it's a buy now play

later platform that doesn't just say hey

buy it now and pay us in four payments

which is what paypal does which is what

square does which is what a lot of the

platforms do they just say buy it now

and they pay us in four payments one

payment now and then three more payments

once every two weeks so it's kind of

like you pay for a product in about six

weeks time which quite frankly is kind

of in my opinion lame because you could

just pay for something on a credit card

and then by the time your statement

closes and your payment actually becomes

due you probably have zero percent

interest for six weeks and then pay off

your credit card but anyway buy now pay

laters or a firm's moat with buy now pay

later has to do with the fact that a

firm's got some pretty big merchant

relations to where a firm is actually

making longer term deals with companies

to offer creative financing for products

over not just for payments this is the

big pay in four thing that mastercard

does paypal does and a lot of the buy

now pay later platforms do uh even

apple's considering getting into it

that's not unique there's no moat there

instead having a merchant relationship

where a firm says hey we'll do creative

financing for 12 24 36 months in

partnership with the merchant that's

where the money is and that's what a

firm is doing really well and in

addition to this a firm is now trying to

get folks into their ecosystem with buy

now pay later average user uses a firm

buy now pay later about 2.2 times we

expect that number to go through the

roof to like five to six times per year

but a firm is also offering savings

accounts and they just announced that

they're going to start offering crypto

purchases to sort of become a mega app

this is at least what sort of fintech

analysts are starting to call this in

fact bank of america calls a firm a mega

app and just raised their price target

for a firm to a hundred sixty dollars

now the stock has hit an all-time high

of about 151 before but we haven't hit

that 160 target yet and what's

interesting is in september all of the

other buy now pay later apps saw a

deceleration in growth in both monthly

app downloads and monthly active users

except for a firm a firm is the only one

that grew at a faster rate of course

you've got after pay owned by square and

klarna both of these together still have

more downloads than a firm a firm comes

in third place at about 22

but from me like my perspective that's a

growth opportunity uh as they sort of

cannibalize more of the of the pie that

they share with others and take more for

themselves now a firm's also considering

offering

debit cards which this is where jp

morgan's like yeah we are gonna work on

competing with this but i'm not so

worried about legacy bank competition uh

it is worth noting though and this is a

little bit of a potential downside that

about 24 of people bank of america

surveyed who use buy now pay later stuff

like options do so because their credit

cards are already maxed like that's not

good okay like for the good of society i

don't recommend people take on more debt

but anyway

it's worth noting that a firm has

something that uh sofi uh well a firm

and so far different and uh a firm does

have something that sofi does not have

and i'm gonna touch on so far in just a

moment

but i really like this about a firm it's

that when you get convinced to use a

firm it's usually not because of a

firm's marketing it's usually because

you saw the affirm option on something

like target or stubhub or wayfair or

whatever this means a firm kind of gets

free customers through the buy now pay

later portal advertised by companies

like even amazon with their partnership

coming soon here in the last quarter of

the year

but then they can funnel people into

their other products savings accounts

crypto debit cards whatever

kind of brilliant if you think about it

but anyway so fine doesn't have this

benefit sofa spends an insane amount of

money on advertising they branded a

stadium

okay there's a whole sofa stadium it's

crazy now so far in a firm are in

different fields so far is all about

home loans student loans retirement

accounts savings accounts also got

crypto and that savings which kind of

overlaps with a firm but those are

really just things where they're trying

to provide you other services like

they'll give you referrals to insurance

like if you go to metkevin.com life met

kevin.com life to try to sign up for

life insurance in as little as five

minutes that's a that's a referral link

so if you

fill out your information and you sign

up because you're like hey this is a

great price i get paid a small thank you

well sofi does that as well with the

same exact company so for example if you

go to sofi and you go to life insurance

you'll have the same squeeze page

instead of saying meet kevin though

it'll say so fine so it's kind of cool

to see that we kind of have the same

relationship like me as a big

corporation like so far i don't know

with that life insurance company it

seems interesting but anyway that's just

the way they make a smaller portion of

their revenue most of their revenue

comes from lending which is kind of what

a firm does as well but we're talking

here home loans student loans retirement

accounts right these are going to be a

little bit different so 19.1 percent of

the revenue at so far comes from stocks

and trading 47 percent is loan

originations and sales that's pretty big

uh and something that's different

between sofi and affirm two is that less

than one percent of uh sofia's revenue

comes from their payment network which

is actually paying for things whereas

almost 50

of a firm's revenue comes from their

payment network and this is kind of like

being the payment processor see when you

check out with a firm a firm doesn't

just make money on the interest rate for

the loan they're giving you they're also

making money by processing the payment

and this is where a firm is really being

a trojan horse to a competitor to

companies like

mastercard visa discover and amex and if

you look up the market caps for those

companies which we'll talk about in a

little bit you'll be blown away with the

potential that a firm has to grow now uh

so you see some differences here i do

think that both of these companies have

a little bit of interest rate risk we do

think that rates will go up over the

next three to four years but then again

you know we've been saying that rates

would go up through you know between

like 2009 and 2019 and they barely did

but anyway if rates go up you'll

probably have some risks built into the

stock like sofi but also with rocket

mortgage and united wholesale a firm

could also be affected by interest rate

risks one of the things to consider as

well though which is kind of interesting

is sofi could have a really good start

to next year because maybe there'll be a

refinance boom again as we get to the

end of student loan forbearance nobody

knows but morningstar gave a so finally

a price target of 20 and 50 cents the

company by the way is also guiding for

like 125 compounded annual growth for

their financial services closer to 40 to

50 percent for their entire company so

financial services would of course be

like stock trading and some of these

other things so they're they're like hey

we're planning on doubling

quite frequently here on on our like

stock trading options and and some of

the other things and when i say options

i don't mean like

options trading because they don't do

options trading i mean options for

people to trade stocks sorry it was

probably a little confusing but anyway

so if i also targets younger customers

and i think a firm probably come covers

and i don't know this with certainty but

probably targets people who

aren't necessarily

a particular age group but are more

individuals who are just looking for

that option to finance a larger purchase

over time so sofi has a little bit of

that target where

banks aren't looking right now in my

opinion which is younger folks trying to

start out their careers

get a house get a student loan build

their wealth and they're kind of pulling

a lemonade where lemonade insurance is

trying to attract millennials to then

grow with them throughout life so that

way if you get your student loan with

sofi hopefully you'll get your home loan

and you'll refinance and you'll do all

that through sofa that's potentially

where companies like united wholesale

mortgage and companies like rocket

mortgage might be lagging a little bit

but i would say rocket mortgage they've

got a pretty convenient app for

millennials in terms of applying for

loans so if anything they might be

competition to so far

so uh there is also a bank charger

charter coming for so far they're doing

this because even though they have

savings accounts they're not allowed to

use that those deposits for loans right

now because they don't have a banking

charter so that could be a catalyst it

could also be a buy the room or sell the

news honestly if you're thinking about

trading it but for me so far and a firm

are huddles they're long huddles they're

not trades unless i do options in them

sometimes i'll sell puts in these and

i'll take profits

but i'm not i'm not too heavily

interested in trading a firm or so far

although i do expect both of them could

trade down

before they continue to rally we'll talk

about that in a bit

so so far we have a market cap of around

12 billion dollars last time i checked

it was about 12.72 might be a little bit

higher now from when i wrote this uh

expecting potentially this could really

draw down 10 20

in sort of a smaller correction a firm

you're just over 30 billion dollars in

market cap it's about two and a half

times larger expect a potential here of

maybe a 10 to 20 percent fall as well

let me make sure i have updated numbers

because

a firm's market yeah i'm sorry a firm's

market cap because the firm has done so

well over the last couple weeks a firm's

market cap is now 39

uh billion dollars excuse me and uh sofi

is now sitting around 15 billion dollars

giving that update because both of these

stocks have run up a little bit but

intraday both of them are falling a

little bit so it might be the start of a

potential buy the dip opportunity would

make which in my opinion makes for a

perfect uh time to uh to release a video

on them so uh anyway we've got uh in

terms of profitability so far is

expected to be profitable in 2022 a farm

still kind of unknown in terms of when

they're going to be profitable uh the

projections out to 2024 don't really

show them profitable yet but close

and i think a lot is going to come down

to their partnership with amazon and so

we'll see this winter how profitable

they end up being if you really wanted

to trade a firm and probably consider

trying to get into a firm on a dip that

happens between now and thanksgiving and

then hold it through the holidays uh

hopefully you get a lot of sort of

hopium over q4 sales which would be

reported sometime between january and

february and maybe traded at that point

in terms of uh sort of total average

annual growth for these companies you've

got growth for both of the companies

sitting around 40 to 50 in 2022 23

you've got larger growth at a firm

expected to be somewhere around 40

and closer to 25 percent for so far and

then once you get out to 24 25 it's kind

of a crapshoot

sales and marketing what's kind of cool

is a firm spent 184 million dollars in a

year

on ads and so far spent 95 million

dollars in a quarter so so far spends

about twice as much money on advertising

as uh compared to a firm and again that

could be because of how a firm is

attracting their customers it's very

different from how sofa is attracting

their customers which is one of the

reasons i like a farm a lot i like so

far too so don't get me wrong they're

both great companies but uh i do think

with the firm you could have a little

bit more of that sticky renewal

relationship which might be a little bit

harder for for sofi especially since

there's so much competition in lending

whereas

lending is competition amongst other

lenders a firm's buy now pay later is

really who got the merchant relationship

you know if if a firm got the sweetheart

deal with target walmart and amazon and

other companies didn't that merchant

relationship becomes the moat i think

that's one of the hardest things for

people to understand when they think

about a firm is building that that mode

is understanding that and it's very easy

to say ah buy now pay later has no moat

whatever for me it's a long huddle

personally i hope that a firm goes back

to like 115 so i can actually go

shopping for it again and i'd like to

see so far somewhere around 15 to 16

again you have kind of a good support

line at so far around 1480 and it's a

little too early to determine a real

support line for a firm just because

we've gapped up so many times you could

look at some of the recent gaps though

probably like 108 another good target as

well certainly if it was under 100 it'd

be great but i think you'd have to you

have really have to see some broader

market pain to see both the firm and uh

and so if i go down to these levels so

maybe if you got a 10 to 15 draw down by

the dip average in a little bit

so uh just comparing some of the market

caps remember a firm was around that 39

billion 15 billion for sofi these are

baby companies compared to some of the

massive ones which of course do way more

revenue and a profitable way more volume

right but amex 136 billion market cap

visa 480 billion mastercard 348

that's crazy right

like those are some huge numbers and

look there has not been a new payment

processor outside of amex visa

mastercard discover and this is a little

known one but

jp morgan's payment processing which is

uh they actually do payment processing

they do it under the visa umbrella but

they do their own payment processing so

you have these five massive payment

processors again amex visa mastercard

discover and then jp morgan under the

visa umbrella you really have not had a

new payment processor

like ever

these companies have been

kind of like the oligopoly of payment

processing

now you do have crypto as a potential

payment processor but in the meantime in

traditional finance

a firm's buy now pay later being a

payment processor really cool trojan

horse to really make a firm a

competitive payment processor and i

think that's where uh you know you could

really see some stretchiness at a firm

especially compared to upstart which is

a lending platform that has just gone to

the moon now upstart is profitable worth

noting so you have some more risk at a

firm because they're not yet profitable

but upstart has just been absolutely

destroying it kicking butt and is a

profitable company now they are selling

at like 180 times forward 2023 uh

earnings which is like an insane number

so they've gotten really really stretchy

but hey you know what people are looking

for deals in the market right now love

the fintech space these are companies

i'm all paying attention to looking for

opportunities to add to them and

hopefully you found this helpful if you

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see in the next video thanks again bye

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