SoFi's Valuation Looks Overstretched: Time to Hit Pause?

SoFi Technologies, Inc. SOFI has made a strong comeback, reflecting renewed investor confidence in its digital-first model and growing stream of fee-based income. Its asset-light platform continues to scale well, helping reduce dependence on traditional lending revenues. But with the stock now trading at over 41X forward earnings, some investors are starting to wonder if SoFi has gotten a bit ahead of itself.

While SoFi’s long-term story remains compelling, it’s important to consider the bigger picture. Ongoing geopolitical tensions, tariff-related uncertainties, and concerns of a possible economic slowdown through 2026 could introduce new challenges. These factors might not derail SoFi’s momentum entirely, but they could weigh on its valuation in the near term. For a company still partially reliant on lending, shifts in the macro environment can impact earnings more than expected.

None of this means SoFi is a sell; it’s more about being thoughtful at these levels. The recent rally has priced in a lot of optimism, so waiting for a more favorable entry could be a smart move. The fundamentals are strong, but letting the valuation catch up to the story may offer better risk-reward.

Other Fintechs to Watch While You Wait on SoFi

If SoFi feels a bit expensive right now, Block XYZ and Upstart UPST may offer better value. Block, trading at a forward P/E of 2X, stands out for its diversified ecosystem, including Cash App and Square. Investors value Block for its balanced revenue streams and long-term fintech vision. In a choppy market, XYZ may offer steadier ground.

Meanwhile, Upstart, with a forward P/E of 33X, continues to lean into its AI-driven lending platform. Though UPST has faced volatility, it remains a strong contender if credit conditions stabilize. For those seeking growth at more grounded valuations, both Block and UPST deserve consideration while SoFi cools off.

SOFI’s Price Performance, Estimates

The stock has gained 21% in three months compared with the industry’s 10% rally.

The Zacks Consensus Estimate for SOFI’s earnings has been on the rise over the past 60 days.

SOFI stock currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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This article originally published on Zacks Investment Research (zacks.com).

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