SoFi Technologies shares decreased by 6% on Thursday after KBW issued a downgrade, citing concerns about the company's high valuation and aggressive financial projections. This setback ended a multi-month rally.
Analysts at the brokerage assigned an "underperform" rating to the stock and set a price target of $8, which is nearly half of SoFi's most recent closing price.
This action highlights the difficulties and elevated expectations that startups like SoFi, which provides digital banking and brokerage services including loans, credit cards, and investment options, encounter as they evolve into established financial service providers.
The brokerage noted that a robust economy, declining interest rates, and the company's ability to enhance scale and profitability warrant a shift in investment perspective towards a long-term vision of a mature SoFi.
"The stock's valuation has become excessively stretched across a broad range of multiples," they stated.
They also indicated that achieving earnings per share forecasts for 2026 and the company's long-term goal of a 20%-30% return on tangible common equity (ROTCE) will be challenging.
Currently, shares are trading at $14.53 and are on track for a fourth consecutive day of losses if the current trend continues. They have nearly doubled in value since October.
KBW data indicates SoFi's stock is trading at 69 times projected 2025 earnings, significantly higher than the 12.2 average for its consumer digital lending peers. SoFi has not yet responded to inquiries.