SoFi Technologies (SOFI) stock is down about 23% so far this year. While the fintech company and digital bank reported better-than-expected results for the fourth quarter of 2024, its profit guidance failed to impress investors. Despite the recent pullback, several Wall Street analysts are cautious about SOFI stock mainly due to concerns over the company’s profit outlook, intense competition, and macro uncertainties.
Solid Growth in 2024
SOFI’s revenue grew 26% to $2.7 billion in 2024, thanks to an expanding member base, extensive product offerings, and the company’s efforts to grow beyond traditional lending and shift toward capital-light, fee-based revenue streams. Notably, the combined revenue from SOFI’s Financial Services and Tech Platform segments made up 49% of the overall adjusted revenue in Q4 2024 and increased 52% year over year. Moreover, the company reported its first full year of GAAP profitability.
Looking ahead, management expects SOFI to deliver revenue growth in the range of about 23% to 26% in 2025, backed by the addition of at least 2.8 million new members. However, the company’s growth investments could weigh on its profits.
Analysts Remain Wary Despite Robust Growth Trajectory
Last week, Bank of America Securities analyst Mihir Bhatia reiterated a Sell rating on SOFI stock with a price target of $13.
The analyst noted that investors are concerned about SOFI’s Tech segment, which includes the two acquired platforms – Galileo and Technisys, as the company cut the outlook for the segment from mid-20% between 2023 and 2026 to mid-teens. The company cited longer lead times and implementation cycles, given the rise in average client size for the lower outlook. Nonetheless, the Tech segment continues to be a key growth driver for the company.
Meanwhile, BTIG analyst Vincent Caintic reaffirmed a Hold rating on SOFI stock. The analyst thinks that the company’s focus on technological innovation positions it as a potential leader in financial services, bolstered by its goal to significantly boost its member base and return on equity (ROE).
However, despite the company’s focus on tech innovation and other positives, Caintic noted that there are uncertainties regarding the scalability of market opportunities and the ability to sustain projected growth rates. The analyst prefers to be on the sidelines for clearer evidence of long-term profitability and market penetration.
Is SOFI a Good Stock to Buy?
While bullish analysts are optimistic about SoFi Technologies stock due to its solid execution and strong growth rates, others are concerned about the weakness in the company’s profitability guidance, the impact of macro challenges, and the ability to consistently deliver solid growth rates.
Overall, Wall Street has a Hold consensus rating on SOFI stock based on six Buys, six Holds, and four Sell recommendations. The average SOFI stock price target of $14.31 implies 20.1% upside potential.
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