Cracks In SoFi’s Loan Book? Analyst Flags Risks Ahead Of Earnings This Month

• An analyst flagged potential pressure on Q1 results due to valuation adjustments.
• The firm highlighted weakening credit trends in SoFi’s securitized loan portfolio, raising doubts about borrower quality.
• Short seller Muddy Waters had accused the company of accounting irregularities in March. 

Keefe Bruyette has slashed the price target on SoFi Technologies’ (SOFI) stock, citing emerging financial pressures and uncertainty about credit performance ahead of the company's first-quarter earnings reports. 

The firm trimmed the price target to $17 from $20 previously, while maintaining an ‘Underperform’ rating, according to TheFly. The new price target implies a mere 3% upside to the stock’s closing price on Wednesday. 

Credit Quality Raises Investor Questions

Keefe pointed to possible challenges in the company’s Q1 results, particularly linked to adjustments in how certain assets are valued on its books.

The firm highlighted feedback from investors who are increasingly uneasy about weakening credit indicators tied to SoFi’s securitized loan portfolios. These instruments, which bundle loans for resale, have shown signs of strain, prompting debate over whether borrower quality may be slipping.

SoFi Technologies’ stock inched 0.2% lower in Thursday’s premarket. On Stocktwits, retail sentiment around the stock remained in ‘bearish’ territory while message volume shifted to ‘normal’ from ‘low’ levels in 24 hours. 

The analyst said it remains premature to form a firm conclusion, but acknowledged that recent data points could signal mounting risks for the company’s lending business.

Muddy Waters’ Accounting Issues Allegation 

On March 17, short seller Muddy Waters Research disclosed a bearish position on SoFi and accused the fintech firm of accounting irregularities. The report raised questions about the company’s loan reporting practices and overall financial transparency. 

Muddy Waters claimed that SoFi may have understated liabilities by at least $312 million and pointed to irregularities in how the company records loan losses and valuations. 

However, SoFi rejected the allegations, stating that the report contains inaccuracies and reflects a misunderstanding of its financial disclosures. 

The company is scheduled to report its first-quarter earnings on April 29. Analysts expect a revenue of $1.05 billion and earnings per share (EPS) of $0.12, according to Fiscal AI data. 

SOFI stock has declined by over 37% year-to-date.  

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