On Thursday, Keefe, Bruyette & Woods made a notable adjustment to its stance on SoFi Technologies (NASDAQ:SOFI), raising its rating on the company's shares from Underperform to Market Perform. The firm has also set a stock price target of $7.50 for SoFi Technologies stock.
The upgrade came after SoFi Technologies' shares experienced a significant drop, falling 24% since the start of the year. The analyst from Keefe, Bruyette & Woods noted that the price decline has brought the stock closer to their revised target.
The firm acknowledged ongoing concerns regarding the long-term sustainability of earnings and capital for SoFi Technologies but indicated that the recent share price drop, coupled with a capital raise, has mitigated some immediate risks for investors.
The analyst's commentary pointed out the beneficial impact of SoFi Technologies' recent financial maneuvers. The company's decision to pay down debt and preferred equity is seen as a positive move for its earnings outlook.
Moreover, the raising of common equity is believed to extend the period during which SoFi can continue loan origination without significantly increasing sales activity. These actions are perceived as reducing risk for the company's stock and offering a more balanced risk/reward profile in light of the lowered valuation.
The new stock price target of $7.50 reflects the analyst's revised assessment of SoFi Technologies' shares following these developments. The upgraded rating to Market Perform suggests that the firm now views the investment as more neutrally positioned, with potential downside risks being offset by recent strategic financial decisions made by SoFi Technologies.
InvestingPro Insights
With SoFi Technologies' recent financial strategies being analyzed, it's important to consider the latest data and insights that can further inform investors. According to InvestingPro, SoFi is anticipated to see net income growth this year.
This aligns with the optimism from Keefe, Bruyette & Woods regarding the company's potential to sustain earnings. Despite not being profitable over the last twelve months, analysts predict the company will turn a profit this year, which could be a pivotal point for investors monitoring SoFi's performance trajectory.
Still, investors should be aware of the company's cash burn and the high volatility in its stock price. SoFi's market capitalization stands at $7.67 billion USD, and while it has experienced a notable revenue growth of 36.11% in the last twelve months as of Q4 2023, its P/E ratio remains negative at -20.22, reflecting its current lack of profitability.
Moreover, the stock's price volatility is evident, with a 28.01% one-year price total return, and a significant drop of 24.22% year-to-date as of 2024. These metrics underscore the importance of risk assessment when considering SoFi's shares.
For those looking to delve deeper into SoFi's financial health and stock performance, InvestingPro offers additional tips and insights. Utilize the coupon code PRONEWS24 to receive an extra 10% off a yearly or biyearly Pro and Pro+ subscription, providing access to an expanded list of tips that can help investors make more informed decisions.
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