SoFi Technologies (NASDAQ:SOFI) shares are coming off an invigorating year, one that certainly ended on a high note. The stock has surged 136% over the trailing twelve months, with over half of these gains coming in the last 3 months alone.
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The market’s excitement is certainly understandable. In Q3 2024, SoFi delivered record-breaking revenues of $689 million, surpassing the consensus estimate of ~$634 million. The company also reported GAAP EPS of $0.05, exceeding analysts projection of $0.04. Meanwhile, SoFi raised its full-year guidance for GAAP EPS to $0.11-$0.12 (vs. $0.11 consensus), up from its prior range of $0.09-$0.10. It also increased its adjusted net revenue forecast to $2.535B-$2.550B, above the earlier guidance of $2.43B-$2.47B and higher than the $2.47B consensus estimate.
Adding to the momentum, the company announced in December that it had surpassed 10 million members – a significant milestone.
Investors won’t have to wait long for further insights. SoFi is scheduled to release its Q4 2024 results on January 27th, providing a comprehensive look at the company’s performance over the past year.
While acknowledging SoFi’s overall progress during 2024, investor Joseph Parrish cautions against making a move prior to the company’s report.
“With lower annualized earnings and a higher market cap, much more growth is needed to suggest undervaluation,” asserts the investor.
Parrish points to a few areas of concern, such as earnings in Q2 and Q3 that were not as robust as those delivered in Q1. For the investor, this is a concrete demonstration that SoFi’s growth may not follow a linear trajectory.
“The year’s operating results show that a lot can differ in a single quarter under SoFi’s operating model, and that should factor into our expectations going forward,” Parrish opined.
Moreover, the investor notes that SoFi’s current market cap of $19 billion has pulled ahead of the company’s earnings. Getting down to brass tacks, Parrish explains that the company would need a CAGR of roughly 20% over the next ten years in order to justify a valuation of $15 billion (or some $3 billion less than the current market cap).
While not dismissing the possibility that SoFi can achieve this feat, Parrish does not believe this gives investors a sufficient “margin of safety.”
Convinced that SoFi is priced to perfection, Parrish is assigning the stock a Hold (i.e. Neutral) rating. (To watch Parrish’s track record, click here)
Wall Street seems to share these sentiments. With 6 Buy, 5 Hold, and 4 Sell ratings, SoFi holds a consensus Hold (i.e. Neutral) rating. Its 12-month average price target of $13.19 implies ~25% downside from current levels. (See SOFI stock forecast)
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Disclaimer: The opinions expressed in this article are solely those of the featured investor. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.
