Morgan Stanley analysts adjusted their rating for SoFi Technologies (NASDAQ:SOFI), downgrading it from Equalweight to Underweight and lowering the price target from $7.00 to $6.50.
The analysts explained the downgrade by pointing to concerns over slowing revenue growth and the risks associated with achieving the 2026 EPS targets. Three months ago, they shifted from an Underweight rating due to a more balanced risk-reward scenario as SoFi’s stock price had aligned with the previous price target. Additionally, SoFi had announced capital relief measures, including a new $2 billion forward flow agreement and other loan sales.
However, since then, SoFi’s shares have risen over 20%, and the current price-to-tangible book value (P/TBV) of approximately 2.4x seems to the analysts to incorporate an overly optimistic view of SoFi’s path to profitability by 2026. This optimism comes amidst a deteriorating revenue growth outlook for 2024. The analysts also see more downside risks than upside potentials in the medium-term outlook, which would require a significant reacceleration in revenue growth to over 25%.