SoFi Technologies Inc. (SOFI) saw its stock price close down 2.81% at $15.57 on Monday, with a further 0.5% drop in pre-market trading on Tuesday. This downturn follows a downgrade from Bank of America Securities (BofA) to “Underperform,” with a price target of just $12 per share. BofA’s rationale centers on valuation concerns, arguing that SoFi’s recent price surge has outpaced its underlying fundamentals. The firm claims SoFi is “priced to perfection,” trading at 20 times its projected 2026 earnings per share – a significant premium compared to its competitors.
This negative outlook from BofA stands in stark contrast to SoFi’s impressive year-to-date performance. The stock has seen a remarkable 61.35% increase year-to-date and a staggering 121.48% rise over the past six months. This growth significantly outperforms the Nasdaq Composite’s gains of 33.66% and 14.8% over the same periods, respectively. The BofA report highlights this disparity, suggesting that the recent rally has led to an overvaluation.
However, a different narrative emerges when examining the stock’s technical indicators. A daily moving average analysis reveals strong support for SOFI. Despite Monday’s drop, the stock remains comfortably above its 20-day, 50-day, and 200-day simple moving averages. This suggests a predominantly bullish trend. Specifically, the 20-day moving average sits at $15.06, while the 50-day and 200-day averages are at $12.03 and $8.44, respectively. While currently trading below its eight-day simple moving average of $15.98, this minor discrepancy doesn’t necessarily invalidate the overall bullish trend suggested by the longer-term averages.
Adding another layer of complexity, the relative strength index (RSI) stands at 68.19, indicating the stock is approaching “overbought” territory. This suggests that a short-term correction might be on the horizon. Yet, it doesn’t negate the potential for further upward movement, especially given the longer-term technical indicators.
The divergence in opinion extends beyond BofA. While Jefferies maintained a “Buy” rating and increased its price target from $13 to $19 on November 26th, a broader consensus amongst analysts paints a more cautious picture. According to Benzinga Pro, the average price target from 26 analysts is $10.2 per share. This wide range in predictions, from a high of $22 (Rosenblatt, February 23, 2022) to a low of $3 (Wedbush, April 2024), underscores the uncertainty surrounding SoFi’s future performance. The average price target of $14.67 among BofA, JPMorgan, and Mizuho suggests a potential 5.74% downside.
In conclusion, the conflicting signals from analyst ratings and technical analysis create a complex scenario for SoFi investors. While BofA’s valuation concerns are valid and the RSI hints at potential short-term correction, the strong support from the longer-term moving averages suggests underlying bullish momentum. Investors should carefully weigh these factors, considering their own risk tolerance and long-term investment goals before making any decisions. The considerable spread in analyst price targets highlights the significant uncertainty surrounding SoFi’s future trajectory.
