SoFi Technologies (SOFI) stock is under pressure on Wednesday after Loop Capital analyst Reginald Smith initiated coverage with a Hold rating and a $22 price target. The target implies about 22% upside from the stock’s current level.
Smith views SoFi as a leading digital bank with a broad product portfolio spanning consumer loans, deposits, investing, and credit cards. He also sees the company’s customer acquisition and deposit-gathering funnels as among the strongest of any mid-sized bank.
Why Smith Remains Cautious on SOFI
Smith believes SoFi has significant opportunities to monetize its growing customer base by expanding relationships with existing users. Cross-selling multiple financial products could help the company increase revenue without requiring a proportional increase in customer acquisition spending.
Despite his Hold rating, Smith expects SoFi to deliver low- to mid-20% compounded annual growth in revenue and EBITDA (earnings before interest, taxes, depreciation, and amortization) in 2027 and 2028. This indicates that he remains constructive on the company’s underlying growth prospects.
However, Smith sees several risks that could weigh on SoFi’s near-term outlook. These include higher interest rates and the company’s shift toward more asset-intensive lending.
The shift toward a more asset-intensive lending model could support stronger economics over time because SoFi retains more of the loans it originates. However, it also requires the company to commit more capital to its balance sheet, making it more sensitive to funding costs, interest-rate movements, and credit conditions.
Higher interest rates could put additional pressure on SoFi if its funding costs rise faster than the yields it earns on its loans. At the same time, a larger loan portfolio increases the risk of credit losses if borrowers struggle to repay. So, while this strategy could boost long-term profits, it also increases SoFi’s credit and balance-sheet risk.
Is SoFi Stock a Buy?
Overall, SOFI has a Hold consensus rating on TipRanks. This is based on seven Buys, seven Holds, and three Sell ratings. The average SoFi Technologies price target of $20.67 implies 14.8% upside potential from current levels. Year-to-date, SOFI shares have dropped 31.2%.
It is worth noting that Smith’s $22 price target is higher than the consensus. However, his Hold rating suggests Smith believes the risks and growth opportunities are relatively balanced at current levels.
