BofA maintains SoFi stock underperform with $13 target

On Friday, BofA Securities analysts maintained their Underperform rating on SoFi Technologies (NASDAQ:SOFI) shares, accompanied by a steady price target of $13.00. The stock, currently trading at $12.45, has experienced significant volatility, falling nearly 14% in the past week despite posting a 78% gain over the last six months. The focus of the analysis was on SoFi’s technology segment, which includes the acquired platforms Galileo and Technisys. These platforms offer a complete core financial system with payment processing capabilities. According to InvestingPro data, SoFi has demonstrated strong revenue growth of 28% in the last twelve months.

The reiteration of the rating came after SoFi reduced its outlook for the tech segment’s growth. Initially projected to be in the mid-20% range from 2023 to 2026, expectations have now been adjusted to the mid-teens. The revision is attributed to longer lead times and implementation cycles, a result of the increasing average client size. This adjustment comes as InvestingPro analysis reveals that two analysts have recently revised their earnings expectations downward for the upcoming period, though the company maintains a healthy gross profit margin of 83%.

Despite the cut in growth outlook, SoFi continues to view its tech segment as a vital component of its strategy. The company believes that even with a lower growth trajectory externally, the segment is essential for developing systems that meet SoFi’s internal needs.

The BofA report aims to give investors a succinct summary of SoFi’s tech segment and its current state. In addition to the report, BofA Securities has scheduled a call to discuss the core banking industry, which will include insights into SoFi’s position. The call is set to take place at 10 AM on March 7, 2025, and interested parties are encouraged to contact their BofA salesperson for registration details.

In other recent news, SoFi Technologies reported its earnings for the fourth quarter of 2024, surpassing analysts’ expectations with an earnings per share (EPS) of $0.05 compared to the forecasted $0.04. The company also delivered higher-than-expected revenue of $734.13 million, exceeding the anticipated $669.17 million. This marks SoFi’s first full year of GAAP profitability, a significant milestone for the company. Additionally, SoFi’s member base grew substantially, surpassing 10 million members, which contributed to a record adjusted net revenue of $260 million, up 26% year-over-year.

In a separate development, SoFi announced its entry into the co-brand card market, partnering with one of the largest global hotel chains. BTIG analyst Vincent Caintic maintained a Neutral rating on SoFi following this announcement, noting the positive market reaction and potential implications for industry competitors. Despite the positive earnings report, SoFi’s stock experienced a pre-market decline, which was not addressed in analyst reports.

Looking forward, SoFi Technologies aims to add at least 2.8 million members in 2025, projecting adjusted net revenue between $320 million and $327.5 million. The company is targeting a 20-25% annual EPS growth beyond 2026, according to statements from CEO Anthony Noto and CFO Chris Lapointe. These developments reflect SoFi’s strategic advancements and robust growth trajectory in the financial services sector.

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