SoFi Technologies (NASDAQ: SOFI) shares plunged about 7% on Wednesday following a rating downgrade from Morgan Stanley.
Morgan Stanley downgraded SoFi Technologies (SOFI) to Underweight on Wednesday, reducing its price target from $7 to $6.50 per share.
Analysts at Morgan Stanley pointed to various concerns, including regulatory challenges and risks in achieving the company’s new profitability goals, as the key reasons behind the downgrade.
The analysts wrote,
“Slowing top line, execution risk on the path to 2026 EPS takes us back to Underweight.”
Analysts caution that SOFI’s stock is overly optimistic about its 2026 profitability, given potential challenges, including a possible decline in top-line growth in 2024.
Morgan Stanley forecasts a medium-term outlook indicating more downside risk than upside beyond 2024, suggesting a substantial resurgence in top-line growth. The firm also anticipates a deceleration in SOFI’s top-line growth for 2024, attributing it to lending revenues likely shrinking more than consensus expects.
Analysts said,
“The new ’24 revenue guide, as implied at about mid-teens growth y/y, was about in line with our estimates. But this was meaningfully above the bears looking for a sharper slowdown in 2024 guidance, helping drive a rally in shares post-EPS. Beyond 2024, new medium-term targets called for top-line to reaccelerate to an implied 25%+ CAGR over 2025-26.”
They added,
“Still, we walked away from 4Q23 earnings with a more negative outlook on lending, or the largest part of SOFI’s business.”
SoFi (NASDAQ: SOFI) Stock Price Action
SOFI stock plummeted -6.79% on Wednesday. The traders had exchanged hands with 109,147,573 (109.14 million) shares compared to the average daily trading volume of 49.94 million.
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