SoFi Technologies (NASDAQ:SOFI) stock outlook is not looking so great these days. On a year-to-date basis, shares have fallen nearly 20%.

The company’s recent $750 million capital raise that includes convertible, which is debt that will convert to equity upon a certain date. This spooked investors who were afraid of possible dilution. While shares are down, here are three reasons hold off buying the dip.

SoFi Stock Is Stable but Rates Matter

Student loan payments resumed in the autumn of 2023, and this looked like a moment of potential growth for the company.

SoFi is one of the largest providers of student loan refinancing in the U.S., with billions of loans originated since the platform’s inception.

This part of Sofi’s business has been its most profitable for a while until a COVID-era federal moratorium put a pause on student debt repayments. The restarting of payments creates an opportunity for SoFi to grow its student loan business.

In SoFi’s Q4 earnings print, the number of lending products issued increased by 24% Y/Y, with a notable increased demand for student loan products. SoFi had also swung back to a net profit on a GAAP basis. Full-year 2023 revenue increased by 35% to $2.1 billion. For 2024, SoFi expects to generate $95 million to $105 million of net income.

However, much of SoFi’s long-term growth is dependent upon where interest rates will go. Faster than expected rate cuts could, in fact, turn out to be headwinds for the company’s loan businesses. If rates stay elevated, that could help SoFi’s loan business in some ways but would not be good for the overall growth of the economy.

Wall Street Remains Ambivalent on SOFI

Despite SoFi’s financial outlook appearing positive, Wall Street remains unimpressed. According to Koyfin, there are 16 analysts covering SOFI, and the overwhelming majority of those analysts have rated SOFI as a “HOLD,” “Sell,” or “Strong Sell.”

The investment bank Jefferies is one of the few banks giving SOFI a “Buy” rating, but even research analysts there cut their price target from $15/share to $12/share.

Piper Sandler, another investment bank, also trimmed their price target while keeping their “Neutral Rating.”

Based on the current average price target and where shares are trading now, SoFi’s stock price could have a 25% upside. In the next section, I’ll detail why that return is probably elusive.

Richly Valued

So far, the S&P500 and Nasdaq Composite have appreciated 10.16% and 9.11%, respectively since the first quarter of trading ended on Friday. The Russell 2000, which tracks small to mid-cap stocks, had traded up 4.81% by the end of Q1. The point is, U.S. equities have become increasingly expensive since the start of the year.

Unfortunately, SoFi has been no different. The lending platform’s share price is trading at an insane forward-looking price-to-earnings ratio.

That is to say, even when SoFi becomes more profitable in the coming quarters, it will remain very expensive. U.S. investors have already become wary of equities valuations in the States and are looking for cheaper yield elsewhere.

At some point, multiples will have to come down, and investors have to decide now whether or not they want to be holding such overvalued stocks when that happens.

On the date of publication, Tyrik Torres did not have (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.