SoFi Technologies had a rough day in the market, with its stock taking a steep nosedive during Wednesday’s trading session, closing down by a significant 13.9%.
The downward spiral came in response to Keefe, Bruyette & Woods analyst Michael Perito downgrading SoFi’s rating from market perform to underperform. Perito also slashed the one-year price target on the stock from $7.50 per share to $6.50 per share, intensifying the market’s concerns.
The plummeting stock today underscores SoFi’s reliance on speculative growth, particularly evident when analyst opinions carry weight. Such verdicts can significantly impact companies, especially those with uncertain future trajectories.
Despite SoFi’s commendable double-digit sales growth – a notable 27% year-over-year increase, culminating in $531 million in revenue for the third quarter – the company’s long-term direction remains elusive. A 47% annual rise in their member count, reaching 6.9 million by Q3’s end, signals solid expansion. However, doubts persist about SoFi’s capability to sustain enduring earnings growth.
Although the stock has plunged approximately 68% from its peak, assessing its valuation is intricate. At around 3.15 times forward sales, SoFi appears attractively priced in light of recent revenue upswings. Yet, trading at about 98 times expected forward earnings reflects the highly speculative nature of its performance trajectory.
For investors comfortable with risk and volatility, eyeing substantial returns, SoFi might present an intriguing addition to their portfolio amidst recent sell-offs. However, caution prevails for those averse to significant downside risks. Still, a rebound in trading could potentially offer robust returns for the stock.
