Shares of the financial technology company SoFi (NASDAQ:SOFI) lost over 22% of its value year-to-date in 2024. Despite this notable drop, SOFI stock has limited upside potential over the next 12 months, based on analysts’ average price target.
The apprehensions regarding loan growth and valuation will likely restrict the upside in SoFi stock. BMO Capital analyst James Fotheringham, who commenced coverage of SoFi stock on January 10, has issued a Hold recommendation. He, however, increased the price target to $10 from $8 per share. Fotheringham anticipates that the weakness in unsecured loans will pressure SoFi’s overall growth.
Another analyst, Mark DeVries of Deutsche Bank, initiated coverage on SOFI stock on January 9 with a Hold rating and a price target of $11 per share. He is concerned about the stock’s valuation.
Against this backdrop, let’s examine the analysts’ consensus rating of SOFI stock.
What is the Future Forecast for SoFi Stock?
Despite macro uncertainty, SoFi performed exceptionally well in the first three quarters of 2023. The increase in member and product base, high-quality loans, growing deposit base, and improving credit metrics supported its top-line and margin expansion. Further, an increase in loans funded by its high-quality deposits is leading to cost savings.
While the U.S. Fed is expected to cut interest rates in 2024, the persistently high interest rate environment poses a challenge and could impact SoFi’s loan growth. This keeps analysts sidelined.
SoFi stock has four Buy, seven Hold, and three Sell recommendations for a Hold consensus rating. Analysts’ average price target of $8.93 implies a limited upside potential of 15.7% from current levels.
Bottom Line
SoFi’s focus on driving high-quality loans is improving its credit quality, with its delinquency and charge-off rates remaining healthy and below pre-COVID levels. Further, its access to low-cost capital, led by a growing deposit base, will likely improve SoFi’s margins. However, near-term concerns regarding loan growth could limit SoFi’s upside potential.
