SoFi stock drops following analyst downgrade

The Yahoo Finance Live team discusses the decline of SoFi shares as Wedbush downgrades its stock from neutral to underperform.x

Video transcript

- Let's take a look at shares of SoFi. They close the day to the downside here, falling almost 5% after Wedbush downgraded the stock from neutral to underperform. They also slashed their price target from $5 to $2.50. Analysts behind that call saying that SoFi's fair value accounting may present some headwinds here, and that analyst David Chiaverini, which is really a friend of the program. He's been on the show a number of times over the last several months here.

But Diane, the big concern here, and why he does have that street-low price target, is because of their accounting measures, and really how they are reporting. And he's saying that regulators could come in and suggest that they operate under a more conservative capital requirement framework.

DIANE KING HALL: Yeah, I saw that. Another thing I saw was SoFi CEO disclosing stock purchases by his wife dating back to 2021. And why is that coming up now as a regulatory filing? That just showing that she had unloaded a significant amount of shares and just that this was in 2021, and so why is this kind of coming out now?

I mean, although it's having an impact in general on the stock today, the downgrade, you still see some who still have it as on the buy side, a buy rating. So it hasn't changed dramatically in terms of the other analysts and their position on the stock. But again, it definitely gives cause for concern with regard to SoFi, with regard, again, to the accounting methods that it used, what could happen with regard to its book value. So, you're seeing that play out in terms of the numbers today.

- Yeah, the stock was off about 9% in earlier trading, pre-market trading, closing the day off about 5%. So certainly a concern here on the street, no real surprise, because we know that Wedbush's David Chiaverini, when he does tend to post notes like this, publish notes like this, they do move the market. So this impact here on SoFi with the downgrade having its price target to $2.50, about half of where it closed today, clearly he sees more downside risk ahead.

DIANE KING HALL: Yeah, indeed.