On Tuesday, Keefe, Bruyette & Woods adjusted their outlook on SoFi Technologies (NASDAQ:SOFI), reducing the price target to $7.00 from the previous $7.50 while maintaining a Market Perform rating. The firm's analysis points to an anticipated rapid increase in net charge-offs (NCOs) in the company's personal loan portfolio, particularly in the second quarter of 2024.
The firm's forecast is based on a detailed review of SoFi's credit performance, which has shown a significant uptick in NCOs over the past year. This trend is expected to not only continue but also to accelerate in the upcoming quarter.
Management at SoFi had previously stated that they expect credit losses to rise throughout 2024, citing the effects of loan seasoning and the shift to shorter-duration loan originations. Despite this, the estimated life of loan loss rate remains unchanged.
Analysts at Keefe, Bruyette & Woods have raised concerns that the projected increase in quarterly NCOs, which could range between 6.30% and 7.10% in the second quarter of 2024, may not be fully anticipated by all investors.
They also noted the challenge that SoFi's management might face in communicating the discrepancy between the rising quarterly NCOs and the stable expected cumulative losses over the life of the loans, which are forecasted to stay within 7-8%.
SoFi Technologies, a financial services platform, has been under scrutiny as investors and analysts alike pay close attention to the company's credit performance, especially in light of the current economic environment. The latest price target revision by Keefe, Bruyette & Woods reflects the concerns surrounding the potential impact of higher credit losses on the company's financial health.
In other recent news, SoFi Technologies has been the subject of several significant developments. The company reported first-quarter 2024 adjusted revenue and EBITDA of $581 million and $144 million, respectively, surpassing both BofA Securities' estimates and the consensus. Despite this, BofA Securities reduced its price target for SoFi from $9.50 to $9, maintaining a neutral rating on the stock. Similarly, UBS lowered its price target from $8.00 to $7.50, also keeping a neutral stance.
SoFi also completed a substantial $350 million personal loan securitization with PGIM Fixed Income, part of Prudential Financial (NYSE:PRU). This move aligns with SoFi's strategy to diversify its capital sources and enhance its lending capabilities. Additionally, Keefe, Bruyette & Woods maintained its Market Perform rating on SoFi shares with a price target of $7.50, noting the company's increased sale of personal loans as a positive sign.
BTIG began covering SoFi Technologies with a Neutral rating, citing concerns such as potential credit trend problems, questions about capital levels, and the possibility of increased banking regulations as factors that may continue to affect SoFi's shares negatively. Lastly, SoFi's management projects a 50% increase in the Financial Services and Technology segments by 2024, indicating potential for expansion and innovation.
InvestingPro Insights
Amidst concerns over SoFi Technologies' credit performance and net charge-offs, the company's financial health remains a focal point for investors. In light of the recent analysis by Keefe, Bruyette & Woods, let's delve into real-time data and insights from InvestingPro to gain a clearer picture of SoFi's financial landscape. SoFi's market capitalization stands at $6.71 billion, with a revenue growth in the last twelve months as of Q1 2024 at an impressive 34.6%, underscoring a robust top-line expansion. Despite the growth, the company's price-to-earnings (P/E) ratio is negative at -28.03, signaling that it has yet to post a positive net income. However, analysts are optimistic, predicting that SoFi will turn profitable this year, which could be a pivotal moment for the company.
InvestingPro Tips suggest that SoFi is currently trading near its 52-week low, indicating a potential entry point for investors believing in the company's long-term value proposition. Additionally, while SoFi is quickly burning through cash and has not been profitable over the last twelve months, there is an expectation of net income growth this year. For investors considering taking a position in SoFi, these metrics could be critical in making an informed decision. For more detailed analysis and additional tips, consider exploring InvestingPro's platform, which includes 9 more tips for SoFi. Use coupon code PRONEWS24 to get up to 10% off a yearly Pro and a yearly or biyearly Pro+ subscription.
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