SoFi stock price has retreated in the past few months, moving from a high of $32.70 in November to the current $25.85. It has formed a head-and-shoulders and a diamond reversal pattern, pointing to more downside ahead of the upcoming earnings.
SoFi Stock Price Prediction: Technicals Point to a Dive
The daily timeframe chart shows that SoFi Technology stock has formed risky chart patterns, suggesting a decline. It has formed a head-and-shoulders pattern, with the head at $32.70 and the shoulders at $30. Most notably, the neckline is at the psychological level of $25, its lowest level in October and December last year.
SoFi stock has also formed a diamond reversal pattern. Additionally, it moved below the Supertrend indicator and the 50-day and 100-day Exponential Moving Averages (EMA). These indicators suggest that the SoFi share price will have a strong bearish breakout, potentially to the 50% Fibonacci Retracement level at $20.
On the flip side, a move above the shoulder section at $30 will invalidate the bearish outlook and point to more gains, potentially to last year’s high of $32.70.
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SoFi Has Made Progress But Faces Major Risks
SoFi Technology has made significant progress over the past few months. It recently launched its stablecoin, SoFiUSD, as it seeks to challenge popular names like Tether (USDT), PayPal USD (PYUSD), and USD Coin (USDC). Its stablecoin is being used internally and will be launched to the public in the coming months.
The company is also planning to re-enter the crypto trading business. Its goal is to provide these solutions to its millions of customers as it scales its financial supermarket business.
Most importantly, the company’s revenue and profitability have continued to grow. The most recent results showed that its membership jumped to over 12.6 million, while net revenue soared 38% to $950 million. Its adjusted EBITDA rose by 50% to $277 million.
The company has also diversified its revenue sources. Its fee-based revenue rose to $408 million, while net interest income is soaring as originations continue to rise.
Wall Street analysts believe its business has more growth potential in the near term. Its upcoming results are expected to show that its revenue rose by 32% in the fourth quarter to $982 million. That report will bring its annual revenue to $3.56 billion, up by 36% YoY. It will then make $4.5 billion this year.
However, there are potential risks, including the fact that its revenue this year will decelerate from 36% to 27%. Another risk is that the company recently diluted shareholders by raising over $1.5 billion.
Most importantly, there are signs that SoFi is grossly overvalued, with a forward P/E ratio of 71. It also has a forward PEG ratio of 1.30, higher than the sector median of 1.11.
To be clear: a company can stay overvalued in perpetuity as long as it keeps publishing strong results. Two good examples of this are Mastercard and Visa, which have maintained their high valuations for years.
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