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Sport News | SoFi stock is down 27% this year, but analysts still love it

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SoFi stock is down 27% this year, but analysts still love it

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Sofi Technologies (NASDAQ:SOFI), the fintech company, is still down. I wrote about it last month when it was at $14.85. But since then, SOFI stock has fallen again, and by midday on January 27, 2022, it was down to $11.56 per share.

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That’s another 22% drop, and in fact, year-end SOFI stock is actually down $4.25 from $15.81 on December 31. This means that it was down 26.9% year-to-date (YTD) when it reached this level. the price. This drop seems really unsustainable, especially since its underlying value is significantly higher.

What is going on? Let’s take a closer look at the situation of SoFi Technologies.

Where are things going with SoFi

I wrote last month that SOFI stock was worth at least $19 per share based on analyst base target prices. Additionally, SoFi reported bumper earnings on Nov. 10, with the release of its third-quarter financial results.

Additionally, SoFi now has 2.9 million members, up 96% year-over-year. This gives him a huge base to which he can sell a large number of financial products.

SoFi provided guidance of $272 million to $282 million for the fourth quarter. The figure is significantly higher than last year, but only slightly higher than its third-quarter revenue of $277.19 million on a non-GAAP basis.

This could be one of the reasons why the stock has been so weak lately. Analysts and investors generally want to see good consecutive quarterly revenue growth. This implies that going forward, its year-over-year growth will not slow down, which seems to be happening here.

Where do analysts stand on SoFi Stock

Nevertheless, analysts’ projections for the stock still look quite exuberant. For example, Seeking Alpha now shows that the average of 12 analysts is now $20.23. That’s more than last month’s price target of $19 per share.

So here we have a situation where analysts are getting more positive on the stock, but it is still falling. I don’t see this continuing for very long.

In reality, TipRanks.com reports that 10 analysts who have written about the stock over the past 3 months have an average target price of $20.30. This represents an increase of more than 75.3% compared to today’s price.

One of the problems with SoFi’s financials is that so far it’s not been profitable EBITDA (earnings before interest, taxes, depreciation and amortization) and positive cash flow. This could also be a reason why the stock has been so weak lately.

In fact, some investors may want to wait until the company gets to that stage before investing in SOFI shares. On the other hand, analysts now expect the company to make $1.46 billion in revenue in 2022. This implies a potential upside of 46% from analysts’ 2021 revenue estimates.

Given that SoFi now has a market capitalization of $10.3 billion, this implies that the price/sales (P/S) multiple for 2022 is only 7.1 times. It doesn’t seem very expensive. For example, Morningstar.com reports that the average P/S multiple in 2021 was 14.6 times.

What to do with SoFi stocks

Recently, analysts have taken note of the stock’s weakness and higher underlying value. On January 21, Wedbush initiated a hedge on SOFI shares with an “outperform” rating and a price target of $20.

The analyst’s thesis was based on a five-year compound annual revenue growth rate of 28% through 2026. In addition, the analyst pointed out that the firm’s customers will have an average FICO score of 750. , which will allow it to have high profits and low amortization expenses.

In addition, SoFi recently received a banking charter, which also allows it to have lower financing expenses. It also gives them a competitive edge over some of their peers.

As a result, investors may want to piggyback on that analyst’s recommendation and lower the stock’s average. This will allow them to significantly reduce their average costs, which is good for long-term profits for the long-term investor.

As of the date of publication, Mark R. Hake did not hold any position (directly or indirectly) in the securities mentioned in this article. The opinions expressed in this article are those of the author, subject to InvestorPlace.com Publication guidelines.

Mark Hake writes about personal finance on mrhake.medium.com and Newsbreak.com and execute the Guide to Total Return Value that you can see again here.

SoFi stock is down 27% this year, but analysts still love it

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