SoFi Technologies Faces Downgrade From Morgan Stanley Over 'Too Optimistic' Bank Business Projections

Shares of SoFi Technologies Inc SOFI started Thursday’s trading in the red, having remained volatile since the U.S. Supreme Court blocked Biden's student loan forgiveness program.

SoFi Technologies looks “increasingly like a bank,” and should be valued like one, according to Morgan Stanley.

The SoFi Technologies Analyst: Jeffrey Adelson downgraded the rating on SoFi Technologies to Underweight, while raising the price target from $6.50 to $7.00.

The SoFi Technologies Thesis: The stock reflects a quick ramp-up in bank profitability, hitting more than 30% (return on average tangible common equity), which appears “too optimistic, in our view,” Adelson said in the downgrade note.

Check out other analyst stock ratings.

“We estimate the bank business can generate only a 15% ROTCE by 2026e,” he added.

The analyst stated that the potential benefits from restarting student loans might not be as high as initially anticipated. “We believe the student refi TAM post-moratorium is ~half the $200B SOFI expects, at $70-110B,” he wrote.

“President Biden's new 12-month grace period may also act as a headwind to refi demand,” Adelson said. “Our new forecast assumes refi volumes ramp by 75% in '24, but remains 10% below consensus and ⅓ below pre-Covid,” he added.

SOFI Price Action: Shares of SoFi Technologies were down 1.3% to $9.08 at the time of publication Thursday.

Now Read: DeSantis's 'Lasting Harm' To Disney In Florida Pushes Mouse House To Boost California Investments

Photo: Shutterstock