SoFi Technologies (SOFI) recently reported strong earnings for Q4 2024, yet its stock has taken a hit. This was due to several concerns from investors. Despite beating earnings estimates, the company’s 2025 outlook fell short of market expectations, subsequently leading to a sharp decline in its stock price.
Let’s go through the reasons that inspired the stock drop.
It All Starts with Disappointing Guidance
As stated above, one major factor behind the stock drop is SoFi’s disappointing 2025 guidance. The company projected GAAP earnings per share (EPS) of $0.25 to $0.27, missing Wall Street’s consensus estimate of $0.292. Additionally, its Q1 2025 forecast of $0.03 EPS was well below expectations of $0.062. Also, investors couldn’t ignore SoFi’s projected adjusted EBITDA of $845 million to $865 million, which again fell short of the $913.5 million forecasted by analysts. This softer-than-expected guidance is one factor that is responsible for SoFi’s 15.01% stock decline.
Profit-Taking and Analyst Opinions
Another reason for the decline is profit-taking. Before the earnings report, SoFi’s stock had gained 111.13% over the past year, leading some investors to sell and secure their profits. Additionally, analyst opinions have contributed to investor caution. While some analysts raised their price targets, Morgan Stanley (MS) maintained an “underweight” rating on SoFi, prompting concerns about the company’s valuation and near-term growth.
Projections for Growth Are Still on Course
Despite these challenges, SoFi’s 2025 projections still indicate growth. The company expects adjusted net revenue between $3.20 billion and $3.275 billion, an improvement from the previous estimate of $3.05 billion. Additionally, SoFi aims to add 2.8 million new members in 2025, demonstrating strong user acquisition. Analysts predict SoFi’s EPS will grow by 86.7% to $0.28 in 2025 and by another 85.7% to $0.52 in 2026.
What’s Next for SOFI?
Looking at the near-term and long-term, SoFi is set for strong growth, with revenue expected to rise 20-30% annually, hitting $2.84 billion by 2025. The company plans to expand its product lineup, potentially adding a premium credit card and new lending options. However, SoFi must balance growth with profitability to maintain investor confidence. By expanding banking operations and boosting customer retention through cross-selling, it aims to stay competitive in the competitive fintech space.
Is SOFI a Buy, Hold, or a Sell?
Turning to Wall Street, SoFi is considered a Hold based on 16 analysts’ ratings. The average price target for SOFI stock is $14.64, implying a 1.95% upside potential.
