The blistering rally in SoFi Technologies (NASDAQ:SOFI) stock continued after the Q2 earnings announcement. The shares of this consumer-focused financial technology company closed 19.9% higher following the Q2 results. Overall, SOFI stock has rallied over 148% year-to-date, beating the broader market averages by a considerable margin. While SoFi delivered exceptional returns, analysts’ consensus rating indicates a Hold. Further, their average price target suggests downside potential in the stock.
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Against this backdrop, let’s dig deeper.
Analysts Maintain their Stance on SOFI Stock
SoFi delivered stronger-than-expected Q2 performance and increased its full-year revenue and EBITDA guidance. However, Wall Street analysts reiterated their stance on the stock.
Goldman Sachs analyst Mike Ng maintained a Hold recommendation on SoFi stock on July 31. Nonetheless, the analyst expects SoFi to deliver solid growth and improved earnings in the coming quarters, led by continued growth in its high-quality deposit base and a recovery in the lending environment.
Just as Mike Ng remains sidelined, Wedbush analyst David Chiaverini reiterated a Sell rating on SOFI stock. The analyst acknowledged the strength in its personal loan originations and tech platform fees, but he maintains a “cautious view.” Chiaverini believes that SoFi’s capital ratios could come under pressure due to its rapid balance sheet growth. Further, he expects SOFI’s high revenue growth to slow in 2024 and projects the credit trends to weaken a bit.
Echoing similar sentiments, KBW analyst downgraded SOFI stock to Sell from Hold on July 31. The analyst sees SOFI’s valuation as expensive, given the recent bull run. The analyst added, “With growth rates likely to moderate,” SoFi’s “valuation has overshot the fundamental earnings outlook.”
Not All Gloom and Doom for SoFi
Despite the projected headwinds, not all is gloom and doom for SoFi stock. Mizuho Securities analyst Dan Dolev listed multiple catalysts that could drive shares of this consumer-focused financial technology company.
Dolev reiterated a Buy on SOFI stock and expects the company to benefit from the moment in personal loan originations, solid deposit growth, recovery in home loans, and the “positive inflection in Galileo accounts.”
Further, SoFi sold a portion of our personal, student, and home loan portfolios in the second quarter, which the analyst sees as a positive.
What is the Future Forecast for SoFi Stock?
SoFi is expected to benefit from the momentum in its personal loan business and higher-tech platform fees. Further, the expansion of the deposit base and a strong balance sheet augur well for growth. In addition, SoFi’s on-balance sheet delinquency rates and charge-off rates continue to stay healthy and below the pre-COVID levels, which is positive. Nevertheless, the recent rally in its shares keeps analysts on the sidelines.
SOFI stock has received seven Buy, six Hold, and four Sell recommendations for a Hold consensus rating. Meanwhile, analysts’ average price target of $8.81 implies 23.06% downside potential from current levels.
