SoFi Technologies (NASDAQ:SOFI) stock is trending on social media today as shares sink by about 2% as of this writing. This drop comes after Morgan Stanley issued the equivalent of a “sell” rating on the stock.
This news marks the first time in a while that a major firm has given SOFI such a low rating. According to Morgan Stanley, investors should value the company as a traditional bank rather than a fintech play.
Here’s what else investors should know about SoFi and the new analyst rating.
SOFI Stock: Morgan Stanley’s Take
SOFI stock should be sold at its current level, according to Morgan Stanley analyst Jeffrey Adelson. The analyst downgraded the shares to “underweight,” or the equivalent of a “sell” rating.
SoFi’s return on average tangible common equity is widely expected to reach 30%. However, Adelson expects that metric to actually come in at just 15% by the end of 2026. “[A]s SOFI looks increasingly like a bank, we believe it needs to be valued more like a bank,” the analyst stated.
Moreover, higher net charge-offs — along with lower net interest margins and lower fee income — could weigh on the company’s financial results this year, Adelson warned.
All told, Adelson now “sees a skewed risk-reward balance” when it comes to SOFI sock. He believes shares could tumble as much as 70% in the bear case and rise a maximum of only 30% in the bull scenario.
Adelson did slightly increase his price target on SOFI to $7 per share from $6.50. However, this new target is still far below yesterday’s closing price of $9.20 per share.
What Else Should Investors Know?
On June 16, Bank of America and Piper Sandler both downgraded SoFi to a “neutral” rating, citing valuation concerns.
So far this year, SOFI stock has climbed about 100%. However, shares of the company are actually down 6% over past one month, despite the market’s strong rally during the latter period.
On the date of publication, Larry Ramer did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
