Does SOFI Stock's 25% Fall Make It A Buy At $9?
The SoFi Technologies, Inc. logo appears on a smartphone screen in this illustration photo in Reno, ... More United States, on December 20, 2024. (Photo by Jaque Silva/NurPhoto via Getty Images)
SoFi Technologies (NASDAQ:SOFI),a digital financial company that offers a range of products and services, including banking, lending, investing, and insurance, has seen its stock plunge nearly 25% in the past thirty days. This downturn can be largely attributed to growing anxieties surrounding the broader economic outlook. President Donald Trump's recent announcement of sweeping tariffs on goods from over 100 countries has heightened concerns about its potential negative impact on the U.S. economy and consumer spending. This situation is further aggravated by China's retaliatory tariffs, which are higher than anticipated and are fueling an escalating global trade war, resulting in a significant downturn in global markets.
For SOFI specifically, these macroeconomic headwinds present several challenges. Persistent inflation could prevent the U.S. Federal Reserve from implementing further interest rate cuts, which would negatively impact SOFI's lending business. Furthermore, a potential economic recession would likely dampen demand for SOFI's financial services. We believe that SOFI stock looks unattractive - making it a bad pick to buy at its current price of around $9. We believe there are a couple of concerns with SOFI stock, which makes it unattractive given that its current valuation looks very high.
We arrive at our conclusion by comparing the current valuation of SOFI stock with its operating performance over the recent years as well as its current and historical financial condition. Our analysis of SoFi Technologies along key parameters of Growth, Profitability, Financial Stability, and Downturn Resilience shows that the company has a moderate operating performance and financial condition, as detailed below. That said, if you seek upside with lower volatility than individual stocks, the Trefis High-Quality portfolio presents an alternative - having outperformed the S&P 500 and generated returns exceeding 91% since its inception.
Going by what you pay per dollar of sales or profit, SOFI stock looks expensive compared to the broader market.
SoFi Technologies' Revenues have grown considerably over recent years.
SoFi Technologies' profit margins are around the median level for companies in the Trefis coverage universe.
SoFi Technologies' balance sheet looks fine.
SOFI stock has fared much worse than the benchmark S&P 500 index in the last economic downturn. While investors have their fingers crossed for a soft landing by the U.S. economy, how bad can things get if there is another recession? Our dashboard How Low Can Stocks Go During A Market Crash captures how key stocks fared during and after the last six market crashes.
In summary, SoFi Technologies' performance across the parameters detailed above are as follows:
Despite SOFI's seemingly neutral performance when considering the above factors, its very high valuation makes us believe the stock is not a compelling buy at its current price.
While you would do well to avoid SOFI stock for now, you could explore the Trefis Reinforced Value (RV) Portfolio, which has outperformed its all-cap stocks benchmark (combination of the S&P 500, S&P mid-cap, and Russell 2000 benchmark indices) to produce strong returns for investors. Why is that? The quarterly rebalanced mix of large-, mid- and small-cap RV Portfolio stocks provided a responsive way to make the most of upbeat market conditions while limiting losses when markets head south, as detailed in RV Portfolio performance metrics.
SOFI Return Compared With Trefis Reinforced Portfolio
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