SoFi Technologies, Inc. (SOFI) is a finance company that operates as a digital financial services provider. The company operates through its three broad segments, Lending; Technology Platform; and Financial Services.

SOFI’s fintech subsidiary Galileo Financial Technologies announced this month that it became Visa Ready certified as an issuer processor for its PCaaSA (Payment Cards as a Service API) technology for card issuing. By partnering with Visa Inc. (V), Galileo aims to evolve its payments landscape.

However, the stock has declined 72.8% over the past year and 68.4% year-to-date to close its last trading session at $5.00. It is down 21% over the past month.

Here are the factors that could affect SOFI’s performance in the near term:

Bleak Financial Positioning

For the fiscal second quarter that ended June 30, SOFI’s net loss and comprehensive loss came in at $95.84 million and $97.88 million. Its loss per share stood at $0.12.

For the six months that ended June 30, SOFI’s net cash provided by operating activities declined 2,468.7% year-over-year to a negative $1.96 billion, while net cash provided by investing activities decreased 102.1% from the prior-year period to a negative $4.92 million.

Mixed Valuations

In terms of its forward Price/Book, SOFI is trading at 0.90x, 21.2% lower than the industry average of 1.14x. On the other hand, its forward Price/Sales multiple of 3.08 is 16.3% higher than the industry average of 2.65.

Negative Profit Margins

SOFI’s trailing-12-month net income margin of a negative 28.46% is significantly lower than its industry average of 27.86%. Its trailing-12-month ROE and ROA of negative 8.25% and 2.74% compare to their respective industry averages of 11.46% and 1.20%.

POWR Ratings Reflect Bleak Prospects

SOFI’s POWR Ratings reflect this bleak outlook. The stock has an overall F rating, equating to a Strong Sell in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.

SOFI has a Quality grade of F, in sync with its bleak profitability margins.

The stock has a Sentiment grade of C, consistent with analysts expecting its EPS to decline 100% year-over-year in the quarter that ended September 2022 to a negative $0.10 but rise 56% from the prior year to a negative $0.44 in the current year (fiscal 2022).

In the 103-stock Financial Services (Enterprise) industry, it is ranked #102. The industry is rated F.

Click here to see the additional POWR Ratings for SOFI (Growth, Value, Momentum, and Stability).

View all the top stocks in the Financial Services (Enterprise) industry here.

Bottom Line

SOFI’s bottom-line losses and negative profit margins are concerning. Moreover, the stock is currently on a downtrend, trading below its 50-day Moving Average of $6.19 and its 200-day Moving Average of $8.24. Hence, I think it might be wise to avoid SOFI now.

How Does SoFi Technologies, Inc. (SOFI) Stack Up Against its Peers?

While SOFI has an overall POWR Rating of F, one might consider looking at its industry peers, Forrester Research, Inc. (FORR) and Everi Holdings Inc. (EVRI), which have an overall A (Strong Buy) rating, and Consumer Portfolio Services, Inc. (CPSS) and South Plains Financial, Inc. (SPFI), which have an overall B (Buy) rating.

SOFI shares were trading at $4.93 per share on Wednesday morning, down $0.07 (-1.40%). Year-to-date, SOFI has declined -68.82%, versus a -23.62% rise in the benchmark S&P 500 index during the same period.

About the Author: Anushka Dutta

Anushka is an analyst whose interest in understanding the impact of broader economic changes on financial markets motivated her to pursue a career in investment research. More...

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