Shares of fintech SoFi Technologies (SOFI) have rallied 145% over the past six months, offsetting the slump in the first half of the year and bringing the year-to-date rise to 61%. Heading into 2025, analysts are divided on SOFI stock. While SoFi bulls are encouraged by solid fundamentals and growth strategy, several analysts are concerned about the stock’s lofty valuation levels that could impact its movement in 2025.
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SoFi Technologies Delivered Impressive Q3 Financials
SoFi Technologies reported stellar results for the third quarter of 2024. The company’s revenue grew 30% to $697 million, reflecting an acceleration from the 20% growth in the second quarter. Moreover, SOFI swung to an EPS (earnings per share) of $0.05 in Q3 2024 from a loss per share of $0.29 in the prior-year quarter.
The company highlighted the continued shift towards capital-light, higher ROE (return-on-equity), and fee-based revenue streams from a business model that was significantly reliant on lending. In particular, revenue from SOFI’s Financial Services and Tech Platform segment increased by a combined 64% year-over-year and accounted for 49% of the overall adjusted net revenue compared to 39% a year ago.
Moreover, SOFI’s member base grew 35% to 9.4 million as of Q3 2024 end. Also, the company continues to boost its revenues through continued innovation. It added about 1.1 million products in the third quarter, bringing the total products to 13.7 million.
Analysts Have Mixed Opinions on SOFI Stock
Earlier this month, BofA Securities analyst Mihir Bhatia downgraded SoFi Technologies stock from Hold to Sell with a price target of $12. The analyst noted the recent stellar rally in SOFI stock due to Trump’s presidential election win and the company’s favorable Q3 results.
Bhatia acknowledged SOFI’s solid execution and expects the company’s student loan refinance business to gain from “less generous loan forgiveness policies” under the Trump administration. That said, he downgraded the stock as he believes that its valuation is ahead of its fundamentals.
Meanwhile, Morgan Stanley analyst Jeffrey Adelson raised the price target for SoFi Technologies stock to $13 from $7.50 to reflect additional fee income as the company ramps volumes. However, the analyst remains bearish on the stock and reiterated a Sell rating, with his revised price target indicating a downside risk of 22%.
It is worth noting that based on adjusted earnings, SOFI stock is trading at a forward P/E (Price-to-Earnings) of 137.31x compared to the sector average of 12.51x. Even in terms of Price-to-Sales, SoFi is trading at a much higher level of 6.80x compared to the sector average multiple of 3.04x.
Is SOFI Stock a Buy, Sell, or Hold?
Wall Street is sidelined on SOFI stock, with a Hold Consensus rating based on five Buys, six Holds, and three Sells. The average SOFI stock price target of $11.46 implies a possible downside of about 31%.
