Bank of America Analyst Warns of SOFI Stock Correction Amid Overvalued Rally
Wednesday, Dec 11, 2024 10:54 am ET
2min read Bank of America analyst Mihir Bhatia downgraded SoFi Technologies (SOFI) from Neutral to Underperform, citing the stock's 120% rally over the last three months as unsustainable. Bhatia maintained a $12 price target, representing a 24.67% downside for SOFI shares. Analysts' consensus rating is Hold with an average price target of $11.46, a 27.65% downside.
In a recent move that sent shockwaves through the financial markets, Bank of America (BofA) analyst Mihir Bhatia downgraded SoFi Technologies (SOFI) from a neutral to underperform rating. Bhatia's concerns centered around the stock's remarkable 120% surge over the past three months, which he deemed unsustainable [1].The downgrade came amidst a broader market correction, with the Nasdaq Composite experiencing a decline of 33.66% year-to-date. In contrast, SoFi's shares had risen by an impressive 61.35% during the same period, outperforming the market significantly [1].
BofA's downgrade was not the only negative sentiment towards SOFI. Jefferies, another prominent investment bank, maintained a buy rating on the company but increased its price target from $13 to $19 per share [1]. However, their optimistic outlook was not enough to offset the bearish sentiments from BofA.
Despite the downgrade, technical analysis suggests that the stock's trend remains largely bullish. According to data from Benzinga, SoFi's stock is currently trading above its 20, 50, and 200-day simple moving averages, indicating a strong upward trend [1]. However, the stock's price is below its eight-day simple moving average, and the relative strength index is nearing the overbought territory, suggesting that a pullback may be imminent.
It's important to note that while BofA's downgrade may have contributed to the recent decline in SOFI's stock price, it's not the only factor at play. The broader market correction and concerns over the stock's valuation have also played a role in the decline.
According to Benzinga Pro data, SoFi has a consensus price target of $10.2 per share based on the ratings of 26 analysts. The highest price target out of all the analysts tracked by Benzinga is $22 apiece issued by Rosenblatt, while the lowest target price is $3 per share issued by Wedbush [1]. The average price target of $14.67 apiece between BofA Securities, JPMorgan, and Mizuho implies a potential downside of 5.74% for the stock.
In conclusion, while BofA's downgrade of SoFi Technologies may have contributed to the recent decline in the stock's price, it's essential to consider the broader market context and the stock's valuation when evaluating its prospects. With a consensus price target of $10.2 per share and a strong upward trend according to technical analysis, it remains to be seen whether the recent decline represents a buying opportunity or a continuation of the broader market correction.
References:
[1] Benzinga. (2022, February 28). SoFi Technologies Shares Fall After BofA Downgrade Over Valuation Concerns. Retrieved from https://www.benzinga.com/analyst-ratings/upgrades/24/12/42407670/sofi-technologies-shares-fall-after-bofa-downgrade-over-valuation-concerns
