Why is SoFi Technologies, Inc. stock underperforming the market?

SoFi Technologies, Inc. has reported impressive fourth-quarter financial results, surpassing analyst expectations with adjusted earnings of $0.05 per share against the anticipated $0.04 per share. The company achieved a revenue of $739.11 million, exceeding the expected $674.13 million, marking a 24% year-over-year increase in total adjusted revenue. The financial services segment experienced an 84% growth, while the lending and technology platform segments grew by 18% and 6%, respectively. Despite these strong results, SoFi's stock declined due to a less optimistic profit outlook for FY25, with guidance for a 2025 incremental adjusted EBITDA margin of approximately 30%, below the Street's estimate of over 50% and the 2024 margin of 44%. The company's record growth in membership and loan originations, with 785,000 new members added in the quarter, bringing the total to 10.1 million, a 34% increase year-over-year, has been overshadowed by profitability concerns. Analysts have mixed views on SoFi's stock, with ratings ranging from bullish to bearish. The average 12-month price target is $14.19, reflecting a 37.63% increase from the previous average. Some analysts, like Kyle Peterson from Needham and Ashwin Shirvaikar from Citigroup, have raised their ratings to Buy, with price targets of $20.00 and $18.00, respectively. However, others, such as Timothy Switzer from Keefe, Bruyette & Woods and Mihir Bhatia from B of A Securities, maintain negative sentiments with lower price targets. SoFi's revenue growth rate stands at approximately 29.15% as of September 30, 2024, but the company faces challenges in profitability and asset utilization, as indicated by net margins, ROE, and ROA that are below industry standards. CEO Anthony Noto emphasized the strategic shift towards capital-light, higher ROE, cash, fee-based revenue streams as a positive move.