Shares of SoFi (NASDAQ:SOFI) stock are in focus after Piper Sandler analyst Kevin Barker lowered his price target to $8 from $8.50 while maintaining a “neutral” rating. The analyst made the change after analyzing SoFi’s Form 10-K and management commentary.
Barker believes that SOFI stock, trading at around a 14x operating price-to-earnings (P/E) ratio based on expected fiscal year 2025 sales and a 3.4x price-to-sales (P/S) ratio, is fairly valued.
Barker is also cautious about SoFi’s lending segment as the company experiences net charge-offs (NCOs) and personal loan premium amortization. For 2023, lending revenue tallied in at $1.37 billion, up by 20% year-over-year. SoFi has guided for “mid teens compound growth” in its lending segment.
SOFI Stock: Piper Sandler Lowers Price Target to $8
On the bright side, Barker believes that the company’s financial services and technology segment growth will offset any lending headwinds. SoFi has guided for 20% to 25% compound revenue growth until 2026, including 50% compound growth for financial services and mid-20% compound growth for technology.
“We are encouraged to see a more diversified business model whereby when one segment slows, the other can offset some impact,” said Barker.
Barker is a highly rated analyst. On TipRanks, he is ranked at #237 among a total of 8,767 Wall Street analysts. He carries a 62% success rate and an average one-year return of 14.1%.
Meanwhile, Mizuho is a bit more bullish than Barker, with its price target of $12 and a “buy” rating. Analysts at the firm have a bullish view towards SoFi’s recent $750 million convertible senior notes offering and accompanying capped call transaction, as well as its $600 million equity exchange.
“We believe that once investors understand the many positives embedded in the two deals the stock would likely correct upwards,” wrote Mizuho.
Mizuho’s analysts estimate that the exchange could increase SoFi’s tangible book value per share by 10% while also improving capital ratios by more than 2%. The exchange also cuts $60 million in annual interest expenses, which should pay back the capped call costs in about 1.5 years.
On the date of publication, Eddie Pan 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.
