SoFi Technologies fell more than 9.1% on Monday after the financial services company downgraded its rating as Wall Street remains uncertain about the stock.
Analysts at Wedbush downgraded the stock from neutral to underperform in a note Monday, after downgrading its rating from outperform to neutral in early May. They have a target price of $2.50, compared to SoFi (Ticker: SOFI)’s close of $5.02 on Friday.
They said SoFi could be “near a tipping point” in fee income from loan applications and sales, and warned that free income could fall significantly. Wedbush analysts also said the company’s capitalization may be overstated on fair value accounting and that the company may seek to raise capital this year to support growth.
They noted that a capital increase was being considered and referred to a risk factor that had surfaced in a recently filed company filing. The company said that if its current net losses continue for the foreseeable future and it is unable to meet net profit profitability as expected, “we may raise additional capital in the form of equity or debt,” adding that this compares may not be on favorable terms to previous transactions.
The Wedbush team also said it expects regulators to do more scrutiny of capital ratios and stress tests following the Silicon Valley Bank and First Republic Bank bankruptcies.
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SoFi was on an uptrend on Friday, as analysts at Truist Securities began coverage of the stock with a Buy rating and an $8 price target.
“We see SoFi as the future of US banking: digital, flexible and always online,” Truist analyst Andrew Jeffrey said in a note.
It shows how divided Wall Street is on the stock. Of the analysts polled by FacSet, 53% have a buy rating and 47% have a hold rating. Wedbush’s underperform rating is not included in the data.
SoFi stock fell 21% in just two days in early May after the company reported its first-quarter results. Investors appeared to be taking SoFi’s sharp rise in personal loan obligations as a sign of future losses, according to JP Morgan
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Analyst Reggie Smith told Barron’s.
SoFi Technologies did not immediately respond to a request for comment from Barron’s Monday.
Write to Callum Keown at [email protected]