SoFi Shares Drop After KBW Downgrade Cites Valuation Concerns

SAN FRANCISCO: Shares of personal finance app SoFi Technologies fell by as much as 7% on Thursday following a downgrade by analysts at KBW, who expressed concerns over the company’s high valuation and ambitious financial goals. SoFi’s stock was last trading at $14.68, heading toward its fourth consecutive session of losses if current trends persist.

KBW downgraded SoFi to “underperform,” citing the challenges faced by startups like the digital banking and brokerage app as they transition into more mature financial services providers. While SoFi offers a wide range of services, including trading, investment, loans, and credit cards, analysts highlighted concerns that its lofty financial targets may be difficult to meet.

The downgrade follows a reassessment of SoFi’s valuation, with KBW stating that the stock’s multiples have become overstretched. Despite a strong economy, lower interest rates, and the company’s progress toward scalability and profitability, KBW emphasized that SoFi’s long-term goal of achieving a 20%-30% return on tangible common equity (ROTCE) would be challenging.

KBW also revised its price target for SoFi to $8, nearly half of its last closing price, and pointed out that the company is currently trading at 51.35 times its expected earnings over the next 12 months, according to LSEG data.

SoFi, which has yet to respond to requests for comment, faces increasing scrutiny as it seeks to solidify its position in the competitive landscape of digital financial services.