When company insiders - a group that includes executives, directors, and major shareholders - purchase their company's stock, it's often viewed as a positive sign for the stock's future performance. This is because insiders are generally assumed to have a deeper understanding of the company's inner workings and strategic plans compared to the general public.
Information about insider buying and selling activity can be found via publicly available Form 4 filings. Typically, larger transactions made by top executives carry more weight - and insider stock purchases tend to be more revealing, from a sentiment perspective, than sales.
In this context, let's take a look at two hot fintech stocks that have been the target of major buying recently from top insiders.
Block
Block (SQ), formerly known as Square, is a financial services company that offers payment processing, point-of-sale, and other business services. Founded by Twitter (now X) co-founder Jack Dorsey, Block currently commands a market cap of about $33.8 billion.
Block stock is down about 10% on a YTD basis, thanks to a sharp 40% rally so far in November.
Meanwhile, Block Director Roelof Botha just made a significant investment in the company's shares right around the round $50 level.
Botha, of Sequoia Capital, purchased more than half a million shares (540,646 shares, to be precise) for an average price of $50.89. The total SQ purchase amount was over $27.5 million. After the completion of this transaction, Botha now owns 0.2285% of the company.
So, should you follow Botha into Block stock? Here are some of the recent highlights:
Strong Q3 Results: Block posted a strong set of numbers for its latest fiscal Q3 results. Revenues of $5.62 billion in Q3 came in 24% above the year-ago period, with all key segments (except hardware revenue) reporting yearly growth. EPS increased by 31% to $0.55, surpassing the consensus estimate of $0.47. Notably, the company's EPS has topped expectations in four out of the past five quarters.
$1B Share Buyback: Block just announced a $1 billion share repurchase. With cash reserves of over $6 billion, this appears to be a prudent move on the part of the company to support its stock and protect against dilution.
Analysts Are Upbeat: Finally, analysts remain bullish about Block. On average, analysts have a “Moderate Buy” rating on the stock, with a mean target price of $74.14. This denotes an upside potential of roughly 31% from current levels. Out of 34 analysts covering the stock, 22 have a “Strong Buy,” two have a “Moderate Buy,” and 10 have a “Hold” rating.
SoFi Technologies
Founded just over a decade ago in 2011, SoFi Technologies (SOFI) is an online personal finance company that provides a range of financial products and services to its members, including student loan refinancing, mortgages, personal loans, credit cards, investing, and banking. Its market cap currently stands at $7.1 billion.
Unlike Block, Sofi stock has rallied more than 59% on a YTD basis.
So far this year, CEO Anthony Noto has been a significant buyer of SoFi stock, and CFO Christopher LaPointe followed suit earlier this month.
The latest C-suite transactions were carried out on Nov. 9, when LaPointe purchased 14,950 shares at an average price of $6.69 for a total consideration of about $100,000. On the same day, CEO Noto bought 44,000 shares of the company at an average price of $6.7783 for a total sum of $298,246.
Following these transactions, LaPointe and Noto hold stakes of 0.0870% and 0.7619% in the company, respectively. Notably, on a cumulative basis, Noto has purchased SoFi shares worth over $2.5 million so far in 2023.
Here's what else you need to know about SoFi stock right now:
Record Revenues and New Member Additions: In Q3 2023, SoFi reported record net revenues of $530.72 million, up 27% from the previous year. This was supported by record new member additions of 717,000, taking the total number of members to 6.9 million (+47% YoY). Deposit growth was also reported at 23% from the prior year to $15.7 billion.
On an adjusted basis, SoFi lost $0.03 per share, which surpassed estimates for a loss of $0.08 per share. Looking ahead, the lender upped its full-year revenue guidance to a range between $2.045 billion and $2.065 billion.
Loan Origination Strength: For the first time in two years, all three lending segments of SoFi reported yearly growth. Notably, Personal Loans grew by 38% from the prior year to $3.9 billion, while Home Loans and Student Loans rose by 64% and 101% from the prior year to $356 million and $919 million, respectively.
Analysts Are Getting More Bullish: Overall, analysts have deemed SoFi stock a “Hold,” with a mean target price of $9.50. This represents an upside potential of about 29% from current levels. Out of 17 analysts covering the stock, five have a “Strong Buy” rating, 10 have a “Hold” rating, and two have a “Strong Sell” rating - an improvement from only four “Strong Buys” and four “Sell" or worse ratings just a few months ago.
