SoFi stock (SOFI) gained a cool 55% last year and beat the S&P 500 Index ($SPX) by a considerable margin. The stock delivered impressive returns in 2023 also, and more than doubled amid the tech rally. Now though, the stock has fallen from its 52-week highs near $17 and is in correction territory.
The fall in SoFi stock is not surprising, as its valuation had started to look frothy, as I noted in a previous article. SoFi stock tumbled on the first trading day of 2025 after Keefe, Bruyette & Woods analyst Timothy Switzer downgraded the stock from “Market Perform” to “Underperform” while raising his target from $7 to $8.
KBW Downgraded SoFi Stock to a ‘Sell’ Equivalent
In his note, Switzer said lower interest rates, a healthy economy, and SoFi’s "success driving better scale and profitability... justifies shifting our investment thesis towards a more long-term view of what a mature SoFi looks like.” He however warned, "The stock’s valuation has become overstretched across a wide matrix of multiples.” To be sure, sell-side analysts have been bearish on SoFi for quite some time now and if anything, the sentiment has been getting even more pessimistic. Almost 30% of analysts currently rate SoFi as either a “Moderate Sell” or a “Strong Sell” while the corresponding number three months back was under 18%.
SoFi Stock Forecast
SoFi has a consensus rating of “Hold” from the 17 analysts covering the stock and its mean target price of $11.57 is almost 22% higher than Jan. 3 closing prices. Put differently, while Switzer’s target price for SoFi is below consensus estimates, the average sell-side analyst covering the stock also expects it to deliver negative returns over the next 12 months.
However, SoFi’s Street-high target price of $19 (via Jefferies) is around 28% higher than Jan. 3 closing prices. SoFi stock has defied naysayers and delivered impressive market-beating returns for two consecutive years. Can the stock continue to deliver the goods in 2025 as well?
Why SoFi’s 2025 Forecast Looks Positive
The macroeconomic conditions were not very conducive for SoFi over the last couple of years. U.S. interest rates were at elevated levels while SoFi slowed its personal loan business amid fears of higher delinquencies. Moreover, the company has faced uncertainty over student loan forgiveness under outgoing President Joe Biden.
However, cut to 2025, and macro conditions look a lot more supportive for SoFi. While the Federal Reserve has indicated that it will be cautious with rate cuts going forward, interest rates should gradually taper down over the next two years. Student loan refinancing – which was once a key business area for SoFi – should also gain traction as the Biden administration leaves office. The overall U.S. economy also looks to be on solid footing and those predicting a recession in 2024 were proved wrong yet again.
As SoFi CEO Anthony Noto said during the third-quarter earnings call. “We're heading into 2025 with the most favorable conditions of the last seven years with declining rates and a stable economy with the most diverse business we’ve ever had with more members in our ecosystem and more products that serve their needs than ever before.”
SoFi Has Grown Quite Fast
SoFi has delivered impressive growth over the last four years despite a not-so-supportive macro environment. We had the COVID-19 pandemic in 2020, the regional bank crisis in 2023, and conflict in Ukraine and the Middle East. Plus, interest rates went from near-zero levels to multi-year highs. Despite these headwinds, SoFi’s revenues rose by over 20% for 17 consecutive quarters. The company had 9.4 million members at the end of September, which is almost 9 times the 1.08 million members that it had in Q1 2020. Importantly, SoFi managed to grow its top line without losing sight of profitability and has posted GAAP profits for four consecutive quarters. SoFi issued 2026 earnings per share guidance of $0.55 to $0.80 and expects its GAAP earnings to rise by between 20%-25% thereafter. While the guidance looks encouraging, KBW believes that achieving it will be tough for SoFi.
While it remains to be seen whether SoFi can deliver on the long-term guidance, especially given the still-fluid macroeconomic situation, the company has proved its mettle over the last four years. SoFi management has been seamless with its execution even as most high-flying growth names that listed between 2020 and 2022 have flopped.
Is SoFi Stock a Buy?
When it comes to valuation, SoFi’s multiples should be taken in context. The stock trades at over 68x the expected earnings over the next 12 months (NTM) while the price-book multiple is 2.63x. The NTM multiples seem high, but they appear a lot more grounded at 22x the midpoint of its 2026 earnings guidance.
To sum it up, if SoFi can deliver on the long-term forecast that the company has outlined, the stock can still rise from these levels. Given the company’s track record on execution so far I would continue to bet on SoFi especially as the recent correction has made its risk-reward profile a lot more attractive. While I don’t expect the kind of fireworks from SoFi that we saw in the previous two years, the stock can still deliver decent returns in 2025 and beyond.
