The shares of SoFi experienced a significant decline of over 6% on Friday, following the fintech”s unexpected announcement of a $1.5 billion capital raise aimed at supporting its expansion efforts. The stock price fell to a low of $27.50, moving away from its year-to-date peak of $32.6.
This capital raise, which raises concerns about shareholder dilution, marks a year since SoFi implemented a similar fundraising strategy that increased its outstanding shares to 1.2 billion. Despite these challenges, the company”s fundamentals remain resilient, buoyed by a consistent growth in its customer base.
Financial reports indicate that SoFi“s revenue surged from $565 million in 2021 to $3.2 billion in the trailing twelve months, with analysts projecting revenues of $3.5 billion this year and $4.45 billion next year. Notably, SoFi has transitioned into profitability, with projections for net income rising to $498 million in 2024 and $640 million in the trailing twelve months.
Future growth prospects appear promising, especially with the anticipated launch of new cryptocurrency trading solutions, which will enhance its service offerings and position SoFi as a comprehensive financial platform. The company currently provides various financial products, including loans, insurance, mortgages, and credit services.
However, investors should note that SoFi may be perceived as somewhat overvalued at its current price of $27.50, which exceeds the average target of $26 set by sixteen analysts. Additionally, with a forward price-to-earnings ratio of 80, SoFi significantly outpaces the sector median of 11.
From a technical perspective, the daily chart indicates that SoFi has risen from a year-to-date low of $8.70 in April to its current pricing. Despite recent stagnation, the stock has maintained its position within an ascending channel and remains above both the 50-day and 100-day Exponential Moving Averages (EMAs). The presence of a bullish flag pattern suggests a potential rebound in the stock price as dilution fears subside.
Should a recovery occur, investors will be watching closely for a breakout above key resistance at $32.6, which is approximately 17% higher than current levels. Continued upward movement beyond this threshold could signal further gains, potentially reaching resistance around $40.
