Growing near-term headwinds and execution risks to achieving 2026 earnings targets have led Morgan Stanley to recommend clients stay away from SoFi Technologies.
Analyst Jeffrey Adelson downgraded the company to underweight from equal weight and cut his price target to $6.50 from $7. The new forecast implies 22.6% downside for the stock. Shares were down more than 3% in the premarket.
“Slowing top-line, execution risk on the path to 2026 EPS takes us back to Underweight,” Adelson wrote. “We previously moved off our Underweight call 3 months ago as 1) the stock price had come down to our prior PT, reflecting a more balanced risk-reward skew and 2) SOFI announced capital relief in the form of a new $2B forward flow agreement and other loan sales.”
“However, with shares now more than 20% higher since then, and trading at a [price to tangible book value] of ~2.4x, we believe the stock is pricing in too much optimism on the path to 2026 profitability laid out by SOFI, all while staring in the face of a worsening top-line growth outlook for 2024,” Adelson wrote.
SoFi shares surged more than 115% in 2023, marking their best year ever. However, they are down 15.6% year to date.
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