On Monday, Piper Sandler adjusted its price target for SoFi Technologies (NASDAQ:SOFI), bringing it down to $8.00 from the previous $8.50, while maintaining a Neutral rating on the stock. The firm's decision follows a thorough review of SoFi's 2023 10-K filing and recent statements made by the company's management.
The review by Piper Sandler highlighted expected challenges in SoFi's Lending segment, including a deliberate slowdown in growth, as well as an increase in Net Charge Offs (NCOs) and premium amortization on the personal loan portfolio. These factors are anticipated to create headwinds for the segment.
Despite the predicted difficulties in the Lending segment, there is a silver lining with the projected expansion in other areas of SoFi's business. The Financial Services and Technology segments are expected to see significant growth, with management estimating a 50% increase in 2024. This growth is seen as an important factor in balancing the effects of the slowdown in the lending business.
The analyst from Piper Sandler expressed optimism about SoFi's evolving business model, which has become more diversified. This diversification allows the company to mitigate the impact of one segment's slowdown through the performance of others. The analyst noted that this dynamic positions SoFi to better withstand sector-specific challenges.
In terms of valuation, Piper Sandler considers SoFi to be trading at fair value. The current trading price is approximately 14 times the forecasted FY25 operating P/E and 3.4 times the Price to Revenue ratio.
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