Join +750K new investors every month who copy stock picks from billionaire's portfoliosSign Up Free

SoFi Technologies shares tumble as Wedbush downgrades due to potential headwinds

Published 05/15/2023, 08:56 AM
Updated 05/15/2023, 09:03 AM
© Reuters.  SoFi Technologies (SOFI) shares tumble as Wedbush downgrades due to potential headwinds
SOFI
-

SoFi Technologies (NASDAQ:SOFI) shares are down more than 6% premarket Monday after Wedbush analysts downgraded the stock to Underperform from Neutral, cutting the price target in half to $2.50 per share.

The analysts told investors in a note that fair value accounting may present headwinds for the company.

The personal finance firm's share price is trading around the $4.70 per share market at the time of writing.

The analysts explained that the firm believes SoFi may be nearing a tipping point on the fee income it recognizes related to loan origination and sales, while "capital levels may be overstated using fair value accounting," and they think the company may look to raise capital this year to support growth.

"In a hypothetical analysis in which we applied the held-for-investment / CECL accounting methodology used by LendingClub to SOFI's financials would result in SOFI's tangible book value being reduced materially by nearly 60% on an apples-to-apples basis to $1.27/share from the current $3.05/share," they added.

They explained that they do not expect SOFI to change its accounting methodology or reduce its fair value mark assumptions in the near term.

However, "we believe regulators may look at SOFI's accounting and may suggest to SOFI to operate under a more conservative capital requirement framework that contemplates a hypothetical switch to CECL accounting given SOFI is comfortable holding loans to maturity rather than selling them," the analysts wrote.

"We expect regulatory scrutiny on capital ratios and stress testing to intensify following the failures of SIVB & FRC."

Latest comments

Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2024 - Fusion Media Limited. All Rights Reserved.