SOFI shares: why SoFi Technologies is down so sharply

SoFi Technologies (NASDAQ:SOFI) the stock started 2022 under heavy selling pressure. After peaking above $24, SOFI stock has failed to regain the bullish momentum that faded in November.

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Technical traders may have interpreted the breakdown below $18 nearly two months ago, or the 200-day moving average, as a bearish sign.

Markets are not pricing in the fundamental upside ahead. The charter of the national bank is a positive catalyst. Still, the boost to its business doesn’t convince markets to buy SoFi’s decline.

SOFI Stock faces fierce competition

Investors fear giant fintechs like To block (NYSE:SQ) and PayPal Credits (NYSE:PYPL) are facing a downturn. As the Federal Reserve panics to contain runaway inflation, it will raise rates. Established banks will have trillions in assets earning income from widening interest rate spreads.

Fintech companies won’t. They need to build the customer base to attract more assets. Once SoFi’s deposit amounts increase, when it receives a bank charter, its interest income will increase.

SoFi must also maintain current customer growth rates. It will incur costs related to advertising expenses. Additionally, operational expenses will increase as the company hires staff and invests in technology to satisfy its customers.

This year, Super Bowl LVI will be played at SoFi Stadium in Los Angeles despite the virus wave. The company will benefit from additional media coverage. Yet, during the Y2K bubble, had a sock puppet commercial.

At the macro level, rising interest rates will slow the economy. Markets price these risks by lowering SoFi valuations. Risk-averse investors can buy SQ or PYPL shares instead of speculating on SoFi.


SoFi’s unclear outlook is putting pressure on its shares. Investors with a horizon of at least five years can bet that this fintech will continue to grow. The company has 400 institutional owners. These investors believe that SoFi will become a one-stop-shop for financial products that meet customer needs.

Customers would consider SoFi’s products to be more comprehensive than Venmo, PayPal, and CashApp. Word of mouth would get more people to join.

Next month, SoFi’s third-quarter report will give shareholders insight into its business performance for 2022. The company will demonstrate that its operating expenses are falling as its revenue increases. Additionally, management could forecast how its acquisition of Galileo for $1.2 billion will return to shareholders.

SoFi’s banking charter will boost its prospects. The markets will increase the company’s valuation as a bank. Additionally, it will have financial services alongside Galileo to create significant non-interest revenue streams.


Chief Executive Anthony Noto has no opinion on SoFi’s near-term value. Its trading range below $13 and reaching $28.26 varies depending on what the market is willingly paying for the stock.

Noto will expand the business. The business must offer a high return on invested capital and a long-term return on equity. Investors need to revisit these leading indicators. Noto told a Wells Fargo virtual conference that “we are well positioned to have a very high ROE and ROIC that we have articulated during the five-year road show.”

The majority of Wall Street analysts rate SoFi stock as a buy. The average price target is $22, according to Tipranks. In a bearish scenario, investors can compare SoFi to related companies. This multiples pattern from the price book suggests that SoFi is worth around $13 per share.


SoFi’s quarterly membership growth will vary. Combined with a lag between member growth and product adoption, investors have to wait for SoFi to see sales growth. Still, SOFI stock will likely benefit with around 1.4 or 1.5 product sales per member. As the user base grows, SoFi’s operational efficiency will improve. Its business model leverages user growth.

A slowing economy in the coming quarters could force SoFi to spend more on advertising to attract customers. Fortunately, SoFi has a great referral program. Customers who like his product will invite others who are looking for the same types of products. Thanks to the NFL games at SoFi Stadium, society should be boosted by the large audience broadcasting the game.

Your takeaway meals

SoFi’s bearish trend will shake up impatient investors who were looking to trade for cash quickly. Long-term investors can build on their position at favorably low prices. In a few years, SOFI stock may reward the most loyal investors.

As of the date of publication, Chris Lau had (neither directly nor indirectly) any position in the securities mentioned in this article. The opinions expressed in this article are those of the author, subject to Publication guidelines.

Chris Lau is a contributing author for and many other financial sites. Chris has over 20 years of stock market investing experience and leads the do-it-yourself value investing market on Seeking Alpha. He shares his stock picks so readers get original insights that help improve investment returns.

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