SoFi Technologies Tumbles on Underperform Rating. Is Bank of America Wrong?

SoFi Technologies (NASDAQ:SOFI | SOFI Price Prediction) shares dropped almost 8% yesterday after Bank of America (NYSE:BAC) resumed coverage with an underperform rating and a $20.50 price target, implying 30% downside from where it had been trading. 

Analyst Mihir Bhatia cited limited upside at the current valuation multiple as the main reason, even as the firm raised its price objective from $17.50 per share. It also noted SoFi’s two capital raises in 2025 totaling over $3 billion as a modest positive for supporting growth, but maintained caution overall. 

Is Bank of America wrong, or will SoFi continue on the trajectory that saw its stock nearly double over the past year?

What Bank of America Is Worried About

Bank of America’s underperform rating centers on SoFi’s valuation, which the firm views as overstretched. The $20.50 price target is derived from applying a 22 times multiple to its 2027 adjusted earnings estimate of $0.93 per share . This reflects a belief that the stock’s current price, trading around 45 times forward earnings, leaves little room for further gains. Bhatia highlighted that despite SoFi’s progress, the market has already priced in much of its growth potential, limiting upside at these levels.

A key focus was SoFi’s capital raises in 2025. The company completed a $1.7 billion equity offering in the third quarter, followed by another in December, issuing 54.5 million shares for $1.5 billion, bringing the total to over $3 billion. While Bank of America acknowledged these as providing “ammunition” for continued expansion, the raises introduce dilution for existing shareholders and raise questions about efficient capital use. The firm noted the funds are for general corporate purposes, but expressed skepticism about their impact.

On potential acquisitions, Bank of America suggested any deals would likely be smaller and complementary rather than transformative. The analyst speculated on targets in SoFi’s crypto business or prediction market capabilities, but emphasized they would not be “game-changing.” This ties into broader concerns that the capital, while bolstering the balance sheet, may not drive the outsized returns needed to justify the current stock price.

Bank of America also updated its earnings forecasts slightly downward for later years, projecting adjusted EPS of $0.39 for 2025, $0.64 for 2026, and $0.93 for 2027. These figures reflect tempered expectations for profitability growth against a background of dilution and market conditions.

Why the Bears Might Be Missing the Mark

Despite the analyst’s caution, others offer a more balanced view. Barclays raised its price target on SoFi to $28 from $23 while maintaining an equal weight rating, citing a favorable credit environment in 2026 that should boost loan growth. The firm also anticipates improvements in the mortgage origination market, supporting broader consumer finance expansion. Goldman Sachs, while lowering its target to $24 from $27 per share and keeping a neutral rating, still sees potential in SoFi’s trajectory, though it shares some valuation concerns.

Wall Street’s overall consensus is a hold rating on SoFi, with an average price target of $25.50 from 23 analysts, suggesting the stock is fairly valued but with room for moderate upside. Jefferies maintains a buy rating with a $35 target, and Mizuho has a $38 target, both pointing to stronger growth prospects.

SoFi’s operational metrics provide further hints for continued growth. By the end of the third quarter, the company served 12.6 million members, up from 2.5 million in 2021, with 18.6 million products in use. Its Galileo platform hosts nearly 160 million accounts separately. Adjusted revenue grew at a 37% compound annual rate from 2021 to 2024, reaching $2.61 billion, with adjusted EBITDA surging 181% to $666 million. Analysts expect 37% revenue growth and 56% EBITDA growth in 2025. These figures highlight SoFi’s expansion into digital banking, which could outweigh short-term dilution risks.

Key Takeaway

SoFi has come a long way very fast, evolving from a fintech startup to a full-service digital bank with rapid member and revenue growth. Investors shouldn’t be surprised by pullbacks, as the stock’s doubling in 2025 reflects high expectations that can lead to volatility on analyst notes. 

However, the long-term outlook remains bright, driven by ongoing user acquisition and product diversification. Investors should consider buying on any dip, particularly if shares approach Bank of America’s low-side target.