The positive reaction to SoFi Technologies’ (NASDAQ:SOFI) Q4 print has now all but evaporated. The share price has been under pressure recently after the company announced its plans to raise capital via a debt offering.
Looking forward, Piper Sandler’s Kevin Barker, a 5-star analyst rated in the top 3% of the Street’s stock pros, sees more challenges ahead although those will be balanced somewhat by other, more positive developments.
“We continue to expect headwinds to develop in the Lending segment as SOFI slows growth coupled with higher NCOs and premium amortization on the personal loan portfolio,” Barker said. “These headwinds will be offset by significant growth within the Financial Services and Technology segments with management estimating 50% growth in 2024. We are encouraged to see a more diversified business model whereby when one segment slows, the other can offset some impact.”
Barker’s comments come in the aftermath of the Western Financial Services Conference, where SoFi CFO LaPointe provided insights. Following the conference, Barker came away particularly upbeat on the progress being made within the Technology segment. As touched on above, the company expects the Tech + Financial segment revenue to rise by 50% in 2024 and represent 50% of total revenue. However, management offered a more “conservative view” regarding the Lending segment.
As such, Barker has now lowered his operating EPS forecast for FY24E from $0.34 beforehand to $0.31. The new estimate reflects a higher level of premium amortization expense and decreased NII (net interest income) resulting from slower lending growth, albeit somewhat offset by reduced operating expenses.
On the other hand, driven by stronger growth in financial and tech pretax income compared to previous estimates, and fueled by continued expansion within the Tech segment, Barker has raised his FY25E EPS forecast from $0.50 to $0.57.
On balance, Barker sees SOFI stock as ‘fairly valued’ at current levels, reiterating a Neutral rating and lowering the price target from $8.5 to $8, suggesting the stock has a 7% upside from the current share price. (To watch Barker’s track record, click here)
Overall, 7 other analysts join Barker on the sidelines with Hold ratings, and with an additional 4 Buys and Sells, each, the consensus view is that SOFI is a Hold. That said, going by the $9.09 average target, investors will be pocketing returns of ~22% a year from now. (See SoFi stock forecast)
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Disclaimer: The opinions expressed in this article are solely those of the featured analyst. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.
