SoFi Technologies: Underperform Rating Amidst Credit Quality and Growth Concerns

Analyst David Chiaverini from Wedbush maintained a Sell rating on SoFi Technologies (SOFI – Research Report) and increased the price target to $4.00 from $3.00.

David Chiaverini’s rating is based on a careful analysis of SoFi Technologies’ current financial situation and future projections. Despite the company presenting an in-line quarter on a core EPS basis and modestly raising its FY24 guidance, there are concerning factors. The report highlights a significant sale of delinquent loans which, when adjusted for, suggests a higher net charge-off (NCO) rate than reported, indicating potential credit quality issues. Moreover, the trend of losses on more recent loan vintages occurring earlier than in the past is troubling, despite expectations of lower losses in the future. There was also a notable increase in delinquencies, further reinforcing concerns about the firm’s credit quality.

Additionally, Chiaverini expresses skepticism about SoFi’s ability to meet its ambitious growth targets, particularly in the tech platform segment, which is essential to the company’s FY24 guidance. The report points out the seasonally weaker second quarter and the steep growth required in the second half of the year, which may be challenging. Other negative factors include the lowest quarterly loan origination and sales revenue in recent years, conservative growth plans despite new capital, and the departure of key senior-level employees. These elements contribute to the decision to maintain an Underperform rating with concerns that the weakening credit quality could negatively impact SoFi’s fair value.

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SoFi Technologies (SOFI) Company Description:

SoFi Technologies is an online personal finance and bank holding company. It offers lending and financial services products, including student, home, and personal loans. It also provides technology products and solutions. SoFi closed a bank merger and became a bank holding company in 2022.