Investment bankers Keefe, Bruyette & Woods (KBW), a unit of financial conglomerate Stifel (NYSE:SF), cut its rating on SoFi (NASDAQ:SOFI) to “underperform.” The price target was lowered to $6.50 per share.
In response, SOFI stock fell 3% on Jan. 2 and another 6.7% overnight. Shares opened this morning at $8.80, a market capitalization of about $8.5 billion.
SOFI was up 116% in 2023. So far, it is down over 10% in early trading today.
A Polarizing Stock
Analyst Mike Perito called SoFi “polarizing,” with sentiment between bulls and bears wildly divergent. The investment bank cut its 2024 revenue estimate on SoFi to $3 billion. The estimate of EBITDA fell to $493 million. The new estimates are 10-17% below current street expectations.
“Anytime a growth stock is trading at premium valuations with 15-20% downside potential to consensus EBITDA, we believe a more cautious stance is appropriate,” he wrote. The average rating on SoFi is currently a “hold.”
I have been both positive and negative on SoFi. I bought some shares in 2021, which are still showing a loss. While I still like it in the long term, I can understand why many might want to sell.
SoFi is a financial technology (fintech) company that bought a small California bank in February of 2022. Its software lets customers earn high interest on deposits. Its main revenue driver is small personal loans. The software also offers brokerage and cryptocurrency trading. SoFi wholesales its platform to other companies through its Galileo and Technisys units. Recently, it announced a service bot called Konnecta and a Payments Risk Platform.
While the promise of these fintech pieces remains great, results are mainly based on the personal loan business. At Tipranks, analysts of SoFi are now split with four buyers and three sellers. The average price target is $8.58 per share, almost exactly the stock’s current price this morning.
SOFI Stock: What Happens Next?
Expect SOFI stock to go nowhere fast in 2024 unless interest rates fall sharply and interest in its software rises.
As of this writing, Dana Blankenhorn had a LONG position in SOFI. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
