(Reuters) – Shares of personal finance app SoFi Technologies fell as much as 7% on Thursday, after analysts at KBW downgraded the stock to “underperform” on concerns about its lofty valuation and ambitious financial goals.
SoFi stock last traded at $14.68 and is headed toward a fourth straight session of losses, if current levels hold.
This reduction reflects the challenges and high expectations faced by startups like SoFi, a digital banking and brokerage app that allows users to trade and invest while also offering loans and credit cards, as they transition into mature financial services providers.
The strong economy, low interest rates and the company’s “success in improving scale and profitability…justify shifting our investment thesis toward a longer-term vision of what a mature SoFi looks like,” the brokerage said.
“The stock’s valuation has become overstretched across a wide array of multiples.”
SoFi’s long-term goal of achieving a 20% to 30% return on tangible common equity (ROTCE) will be “difficult to achieve,” the brokerage added.
KBW’s $8 price target on SoFi is roughly half of its recent closing price. The company is trading at 51.35 times expected earnings over the next 12 months, according to data compiled by LSEG.
SoFi did not immediately respond to a request for comment.
(Reporting by Niket Nishant in Bengaluru; Editing by Krishna Chandra Illuri)