SoFi Technologies (SOFI) shares are down today’s trading after investment firm KBW downgraded the online bank to Underperform from Market Perform due to its “overstretched” valuation after a strong rally in 2024. Four-star analyst Timothy Switzer used return on tangible common equity scenarios to assess SoFi’s long-term earnings potential and concluded that the stock’s valuation is excessive. Indeed, he anticipates “46% downside from current levels” under a base case with a 10x earnings multiple.
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However, on a more positive note, Switzer acknowledged that improving macro conditions and lower interest rates, along with SoFi’s progress in scaling and profitability, have eased earlier bearish concerns, such as credit and capital issues. Still, the analyst urged investors to take a longer-term view of what a mature SoFi might look like in the future.
It’s worth noting that, so far, Switzer has enjoyed a 82% success rate on his stock ratings, with an average return of 17.2% per rating.
Investor Sentiment Remains Very Positive
In contrast to Switzer’s pessimism, investor sentiment remains very positive. Indeed, although only 2.3% of the portfolios tracked TipRanks hold SOFI stock, the average weighting for those who do hold shares is over 10%. This implies that investors have a lot of confidence in the company. It also helps that there was a 5.7% increase in the number of portfolios holding SOFI in the past 30 days.
What Is the Prediction for SoFi Stock?
Overall, analysts have a Hold consensus rating on SOFI stock based on five Buys, six Holds, and three Sells assigned in the past three months, as indicated by the graphic below. After a 68% rally in its share price over the past year, the average SOFI price target of $11.46 per share implies 18.5% downside risk.
