Market Jitters: SoFi Technologies’ Shares Plummet
Valuation Concerns Weigh Heavily
SoFi Technologies, a popular personal finance app, saw its shares tumble as much as 7% on Thursday, following a downgrade by analysts at KBW. The stock, which was last trading at $14.68, is poised to record its fourth consecutive session of losses if current levels hold.
Ambitious Targets Raise Eyebrows
The downgrade reflects the significant challenges that startups like SoFi face as they mature into full-fledged financial services providers. With its digital banking and brokerage app offering a range of services, including trading, investing, loans, and credit cards, SoFi is under pressure to meet lofty expectations.
Economic Factors and Valuation
A strong economy and lower interest rates have contributed to SoFi’s success, driving better scale and profitability. However, this has also led to an overstretched valuation across multiple metrics. According to KBW, SoFi’s long-term target of a 20%-30% return on tangible common equity (ROTCE) will be difficult to achieve.
Price Target Slashed
KBW’s price target of $8 on SoFi is nearly half its last closing price, a stark contrast to its current valuation of 51.35 times expected earnings over the next 12 months. This significant disparity has raised concerns among investors, leading to a decline in SoFi’s shares.
No Comment from SoFi
SoFi did not immediately respond to a request for comment on the downgrade and its implications for the company’s future prospects. As the market continues to fluctuate, investors will be watching SoFi’s performance closely to see if it can regain its footing.
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