SoFi Technologies stock has rebounded over the past few days, climbing from its year-to-date low of $14.90 to around $18.70. Despite the recovery, the stock remains 43% below its last year-end high, significantly underperforming the broader market as the S&P 500 and Nasdaq-100 indices have surged to record highs.
SoFi Stock Has Fallen Out of Favor Despite Strong Growth
SoFi Technologies is a leading fintech company that has built a well-rounded financial services platform. Customers can find almost all financial services they need on their platform. This includes services such as personal loans, banking, credit scores, mortgage loans, student refinancing, crypto trading, investment solutions, and credit cards.
The company continues its strong revenue growth as more customers join its platform. Its revenue jumped 41% in the first quarter to $1.1 billion, while adjusted EBITDA rose to $340 million. Notably, its fee-based revenue soared to $387 million.
SoFi’s loan originations jumped to $12.2 billion, with total deposits rising to over $40 billion. This growth makes it one of the fastest-growing companies in the financial services industry.
Analysts expect the growth to continue in the foreseeable future. Its revenue is expected to grow by 30% this year to $4.6 billion, followed by 22% in the next financial year.
Despite this optimism, analysts are still cautious about the company. Truist’s Matthew Coad maintained his hold rating and lowered his target from $20 to $17. Citigroup’s Peter Christiansen lowered the target to $30 from $37, while Morgan Stanley set the target at $16.
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The bearish sentiment is largely driven by the company’s valuation, which remains richer than that of fast-growing technology companies such as Nvidia and Micron. SoFi trades at a forward P/E ratio of about 30, well above the sector median of 11.
However, the company boasts a Rule of 40 score above 55%, suggesting the stock is reasonably valued when assessed using a metric commonly applied to SaaS companies.
The muted outlook from analysts is due to a Muddy Waters report accusing the company of unrecorded debt and its retention of risk-on loans it had sold. It also warned that the company had a history of understating its credit losses.
SoFi Technologies Stock Technical Analysis
The daily chart reveals that the SoFi share price has formed a double-bottom pattern with a neckline at $20.10. This pattern is one of the most common bullish reversal signs in technical analysis.
The stock has jumped above the 50-day Exponential Moving Average (EMA) and the 61.8% Fibonacci Retracement level. Also, the Relative Strength Index (RSI) has continued rising.
Therefore, the stock will likely continue to rise, potentially reaching the psychological level of $25, up about 35% from the current level.
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