SoFi shares are enjoying a roaring year, but one new bear thinks their valuation has become "difficult to fundamentally justify."
Shares of SoFi Technologies Inc. enjoyed their best day in roughly a year Monday, but they were giving back some of those gains Tuesday after an analyst questioned whether recent enthusiasm for the stock was proportional to SoFi’s financial reality.
It’s “challenging” to move to a bearish stance on SoFi SOFI shares in light of “such strong momentum” for the stock and his own more upbeat estimates for future growth, Keefe, Bruyette & Woods analyst Michael Perito wrote in the wake of Monday’s earnings report. But he thinks that SoFi’s valuation “has overshot the fundamental earnings outlook,” and he downgraded the stock to underperform from market perform.
The company is “generating 80% of revenues from bank-related activities, and while [its] growth rate and business model are differentiated, the current valuation is difficult to fundamentally justify,” he noted, flagging that SoFi shares were trading at more than 30 times the high end of the company’s target 2023 range for earnings before interest, taxes, depreciation and amortization.SoFi shares were down nearly 6% in Tuesday morning trading after roaring almost 20% higher Monday.
He said he was “struck by many investors’ and analysts’ apparent insistence on viewing SoFi as just another bank,” since “factors like capital and credit are important” but “miss the fundamental point.”
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