SoFi Stock Falls After BofA Downgrade Over Valuation Concerns: Here's What Technical Analysis Shows

SoFi Technologies Inc. (NASDAQ:SOFI) stock closed 2.81% lower at $15.57 apiece on Monday and fell further by 0.5% in premarket trading on Tuesday. This comes after Bank of America Securities downgraded the scrip due to valuation concerns.

However, technical analysis based on the simple moving averages points to a different story for the stock.

What Happened: BofA Securities downgraded the company from “Neutral” to “Underperform” with a price target of $12 per share.

Shares of SoFi rose 61.35% on a year-to-date basis, whereas it advanced 121.48% in the last six months, outperforming the Nasdaq Composite which gained 33.66% and 14.8% in the same period, respectively.

“After the rally, we believe valuation is ahead of fundamentals and SoFi is priced to perfection,” the BofA note said. SoFi’s shares are trading at 20 times its 2026 earnings per share target, which is at a premium to its peers, as per the note. “At this valuation, we view risk-reward less favorably,” it added.

Meanwhile, Jefferies on Nov. 26, maintained its “Buy” rating on the company and increased its price target from $13 apiece to $19 per share.

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Why It Matters: From a technical perspective, the analysis of daily moving averages shows strong support for the SoFi Tech stock.

Despite falling nearly 3% on Monday and further in after-hours to $15.56 a piece, SoFi's stock is above its 20, 50, and 200-day simple moving averages, suggesting a largely bullish trend. The 20-day moving average price was $15.06 apiece, whereas the 50 and 200-day prices were $12.03 apiece and $8.44 per share respectively.

However, the current share price is below its eight-day simple moving average of $15.98 apiece. On the other hand, the relative strength index of 68.19 suggested that the stock is near the "overbought" territory.

Views By Other Analysts

According to Benzinga Pro data, SoFi has a consensus price target of $10.2 per share based on the ratings of 26 analysts. The highest price target out of all the analysts tracked by Benzinga is $22 apiece issued by Rosenblatt as of Feb. 23, 2022. The lowest target price is $3 per share issued by Wedbush in April this year.

The average price target of $14.67 apiece between BofA Securities, JPMorgan, and Mizuho implies a 5.74% downside for SoFi.

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