SoFi Technologies (NASDAQ:SOFI) was cut to Underweight at Morgan Stanley on Wednesday, with analysts lowering the bank's price target for the stock to $6.50 from $7 per share.
Analysts cited factors such as regulatory headwinds and execution risks to reaching the company's new profitability targets as reasons for the downgrade.
"Slowing top line, execution risk on the path to 2026 EPS takes us back to Underweight," the analysts wrote. "We believe the stock is pricing in too much optimism on the path to 2026 profitability laid out by SOFI, all while staring in the face of a worsening top-line growth outlook for 2024."
Looking beyond 2024, Morgan Stanley believes there is more downside risk than upside to the medium-term outlook, which implies a meaningful reacceleration in top-line growth.
However, as stated, Morgan Stanley expects SOFI top-line growth to slow in 2024, as lending revenues "likely shrink more than consensus expects."
"The new '24 revenue guide, as implied at about mid-teens growth y/y, was about in line with our estimates. But this was meaningfully above the bears looking for a sharper slowdown in 2024 guidance, helping drive a rally in shares post-EPS. Beyond 2024, new medium-term targets called for top-line to reaccelerate to an implied 25%+ CAGR over 2025-26," said analysts. "Still, we walked away from 4Q23 earnings with a more negative outlook on lending, or the largest part of SOFI's business."