Shares of financial technology companies like SoFi Technologies (NASDAQ:SOFI), Upstart (NASDAQ:UPST), and Affirm (NASDAQ:AFRM) have lost substantial value. For instance, in one year, SOFI, AFRM, and UPST stocks are down about 72%, 91%, and 92%, respectively. While these stocks have marked a significant correction, the ongoing headwinds (a weak credit environment) could continue to hurt their prospects in the short term.
SoFi, Affirm, and Upstart’s stocks skyrocketed amid the pandemic as demand for their platforms skyrocketed. However, rising interest rates, fear of deterioration in delinquency rates, and an uncertain economic environment weighed on the shares of these companies that are focused on consumer finance and lending.
Providing his outlook for 2023, Mizuho Securities analyst Dan Dolev said that the rising interest rates and delinquencies could “continue to weigh on consumer lenders / lending tech stocks like UPST, and to a lesser extent on SOFI,” which is now a regulated bank. As for AFRM, the analyst believes that the Buy-now-pay-later (BNPL) operators will also feel the heat of macro headwinds. However, AFRM’s solid execution keeps Dolev optimistic.
Is SoFi Stock a Buy?
SoFi is now a penny stock. (Learn more about penny stocks here.) The extension of the student loan moratorium could hurt SoFi’s near-term financials. Meanwhile, mortgage refinancing volumes could stay under pressure as interest rates rise. Higher personal loan originations, on the other hand, are a plus, as are the benefits of the bank charter, which lowers its lending costs.
Seven analysts recommend a Buy on SOFI. Meanwhile, four analysts maintain a Hold. It has a Moderate Buy consensus rating on TipRanks. Further, analysts’ average price target of $7.18 implies 59.56% upside potential.
What stands out is the recent buying of SOFI stock by its CEO and Director, Anthony Noto. According to TipRanks, Noto capitalized on SoFi’s lower price and acquired $7.4 million worth of shares in December 2022. However, hedge funds have been reducing their stake in SOFI stock. Our data shows that hedge funds sold 6.2M SOFI stock in three months. It carries a Neutral Smart Score of six.
What’s the Prediction for UPST Stock?
Higher interest rates, an increase in delinquencies, credit tightening, and UPST’s reliance on third-party financing have all contributed to the stock’s decline. Regardless of the massive decline in UPST stock, Wall Street analysts maintain a bearish outlook as the volatile macro environment and high-interest rates could continue to hurt its performance and affect loan demand.
UPST stock has received four Holds and seven Sells for a Moderate Sell consensus rating on TipRanks. The average price target of $13.85 implies 7.45% upside potential.
Besides for analysts, the stock has negative signals from hedge funds, insiders, and retail investors holding portfolios on TipRanks. Hedge funds reduced their holdings by 4.7M shares in three months. Further, insiders sold UPST stock worth $144.3K. It scores one on TipRanks’ Smart Score system, implying underperformance.
Is AFRM a Buy or Sell?
A weak credit environment and the economic slowdown could continue to pose challenges for AFRM stock in 2023. The company recently reduced its Fiscal 2023 outlook, citing a tough macro environment.
AFRM stock sports a Hold consensus rating on TipRanks based on seven Buy, seven Hold, and three Sell recommendations. However, due to the significant decline in its price, analysts’ average price target of $19.50 implies a massive upside of 114.29%.
In line with analysts’ recommendations, AFRM stock sports a Neutral Smart Score of four on TipRanks.
Bottom Line
The expected economic slowdown in 2023 will likely weigh on the financials of these financial technology companies and their share price. While only SoFi has a Buy recommendation, it has a Neutral Smart score, implying it could perform in line with the broader market averages. Meanwhile, with negative indicators from analysts, hedge funds, insiders, and retail investors, UPST stock is likely to underperform.
