On Thursday, Keefe, Bruyette & Woods analyst Timothy Switzer adjusted the rating on SoFi Technologies (NASDAQ:SOFI) stock, moving it from Market Perform to Underperform. Accompanying this downgrade, the firm also reduced the price target to $7.00 from the previous $8.00.
The analyst provided insight into the reasoning behind the downgrade, noting that SoFi's shares experienced a significant surge in 2024, climbing 57%, including a doubling of its value since September. InvestingPro data confirms this remarkable performance, showing a 138.76% return over the past six months and strong revenue growth of 32.15% in the last twelve months.
This performance was attributed to a positive market sentiment towards high-growth fintech companies after the election, an improved macroeconomic environment, decreasing interest rates, and SoFi's own strides in scaling and profitability. These factors, KBW suggested, have mitigated several concerns previously held by investors, such as credit and capital issues, as well as weak demand in secondary markets.
Despite these improvements, the analyst expressed caution, stating that SoFi's current stock valuation appears to be overstretched when assessed against various financial metrics. This assessment holds even if SoFi were to meet its ambitious long-term goals. The firm's ongoing concerns regarding the bearish arguments they have extensively outlined in previous research contributed to the decision to lower SoFi's stock rating.
This downgrade reflects a shift in investment perspective, focusing on a long-term view of SoFi's potential as a mature company. While acknowledging SoFi's recent successes, Keefe, Bruyette & Woods maintains reservations about the sustainability of the company's current market valuation in light of the challenges it still faces.
In other recent news, SoFi Technologies, Inc. reported robust growth in its Q3 2024 earnings call, with adjusted net revenue reaching $689 million, a 30% increase from the previous year.
The financial services segment doubled its revenue to $238 million, and the tech platform saw a 14% rise to nearly $103 million. The lending segment also performed strongly, with $6.3 billion in loan volume. In terms of analyst updates, BofA Securities downgraded SoFi from Neutral to Underperform, citing concerns about the company's valuation.
On the other hand, Mizuho (NYSE:MFG) Securities maintained a positive stance on SoFi, raising its price target on the company's stock to $16.00, up from the previous $14.00. Silver Lake Technology Associates IV, L.P. and related entities sold approximately 31.2 million shares of SoFi, resulting in a reduction of Silver Lake's ownership stake in the company. Lastly, SoFi CEO Anthony Noto entered into a prepaid variable forward contract on company stock, a move that will see him receive an upfront cash payment of $22.4 million.
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