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SoFi Stock Off 6%, Falls on Downgrade

Wesley ParkThursday, Jan 2, 2025 11:20 am ET
7min read



SoFi Technologies' stock took a hit on Thursday, falling as much as 7% after analysts at KBW downgraded the stock to "underperform" due to concerns over its lofty valuation and ambitious financial targets. The downgrade reflects the challenges and higher expectations startups like SoFi face as they transition into mature financial services providers. A strong economy, lower interest rates, and the company's "success driving better scale and profitability... justifies shifting our investment thesis towards a more long-term view of what a mature SoFi looks like," the brokerage said. However, the stock's valuation has become overstretched across a wide matrix of multiples, and KBW's price target of $8 is nearly half its last closing price, indicating a significant potential downside for the stock.

SOFI Interval Trading Volume, Interval Percentage Change
Name
Date
Interval Trading Volume(Share)
Interval Percentage Change%
SoFi TechnologiesSOFI
20241202-20241231
952.89M
-6.15


SoFi's long-term target for a 20%-30% return on tangible common equity (ROTCE) will be "tough to achieve," the brokerage added. KBW's downgrade comes on the heels of a recent rally driven by investor optimism and lower interest rates. While KBW slightly increased its price target, it expressed concerns about SOFI's lofty valuation, deeming its long-term earnings potential insufficient to justify the current stock price. The brokerage concluded that the current risk-reward profile for SOFI investors leans heavily toward potential losses.



According to Benzinga Pro data, SoFi's stock was last trading at $14.68 and is heading towards a fourth consecutive session of losses, if current levels hold. The company shares rose 59.59% in 2024, outperforming the Invesco QQQQ Trust ETF QQQ, which rose by 26.99%, according to Benzinga Pro data. SoFi has a consensus price target of $9.98 per share based on the ratings of 26 analysts. The highest price target out of all the analysts tracked by Benzinga is $16 apiece issued by JPMorgan as of Dec 2, 2024. The lowest target price is $3 per share issued by Wedbush on April 30, 2024. The average price target of $13.67 apiece between Morgan Stanley, B of A Securities, and JPMorgan implies an 11.14% downside for SoFi.

SOFI Total Revenue, Net Income
单位


SoFi Technologies reported financial results today for its first quarter ended March 31, 2024, with adjusted net revenue of $581 million, representing 26% year-over-year growth. The company delivered adjusted EBITDA of $144 million, a 25% margin, representing 91% year-over-year growth. This equates to a 57% incremental adjusted EBITDA margin, with all three segments profitable on a contribution basis. At the same time, SoFi further strengthened its balance sheet, growing tangible book value by $608 million, ending the quarter at $4.1 billion and $3.92 of tangible book value per share up 16% sequentially.



Anthony Noto, CEO of SoFi Technologies, Inc., commented: "Our first quarter was an exceptionally strong start to 2024, demonstrating significant momentum as we responsibly grow revenue and diversify toward our Financial Services and Tech Platform segments, sustain profitability, reinforce our balance sheet, and grow our member base. We delivered adjusted net revenue of $581 million, representing 26% year-over-year growth. Financial Services and Tech Platform segment revenue combined grew 54% and represented a record 42% of consolidated adjusted net revenue, offsetting flat Lending segment revenue given a more conservative approach in light of macroeconomic uncertainty."

In conclusion, SoFi Technologies' stock price decline following KBW's downgrade reflects the challenges and higher expectations startups like SoFi face as they transition into mature financial services providers. The company's lofty valuation and ambitious financial targets have raised concerns among analysts, leading to a significant potential downside for the stock. Despite the recent setback, SoFi's strong first quarter performance and long-term growth prospects may attract investors seeking exposure to the digital financial services sector.
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goodpointbadpoint
01/02
$SOFI just added another 1,000 shares. With the average price now in the low $8s, it looks like a promising start to the new year!
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notbutterface
01/02
$SOFI just bought 50 shares to kick off a new position here! :)
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r2002
01/02
$SOFI it's hilarious that people actually take these analysts seriously and sell their shares. Have you seen most of them? They're just a bunch of washed-up frat boys with finance degrees. 😂😂😂😂🤣
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fluffnstuff1
01/02
SoFi's growth is solid, but valuations are spooky
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Traditional-Jump6145
01/02
SoFi's val is stretched, but with 91% YOY EBITDA growth, there's potential for a solid bounce back. 🤔
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FirmMarket4692
01/02
Holding SOFI long-term, eyeing potential dip buys
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Powerballs
01/02
I'm holding SOFI for the fintech play, not just lending. Diversification is key in this volatile market.
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MustiXV
01/02
KBW downgrade got me 🤔. SoFi's valuations feel stretched, but long-term play could still pay off.
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YungPersian
01/02
KBW downgrade just a speed bump, not a crash
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shakenbake6874
01/02
KBW's downgrade might spook noobs, but long-term players know SoFi's growth story ain't over yet.
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