SoFi stock has had a brutal start to 2026. Here's what I think is going on.
Shares of digital financial services company SoFi Technologies(NASDAQ: SOFI) are down nearly 40% year to date as of this writing. Even worse, the stock has shed about 50% of its value from a 52-week high of $32.73. And shares fell about 13% in late April, the day after SoFi reported strong first-quarter results.
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So what's really going on? If you think it's a deteriorating business, that theory doesn't hold up. SoFi recently posted what was arguably its best quarter ever, with member growth and revenue both reaching record levels. The disconnect between the stock and the underlying numbers, however, is less puzzling than it first appears once you piece together a few things investors have been wrestling with.
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Record growth, with one wrinkle
SoFi's first-quarter adjusted net revenue rose 41% year over year to a record $1.1 billion -- an acceleration from 37% growth in the fourth quarter of 2025. Adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) climbed 62% to a record $340 million, translating to a 31% margin. And GAAP net income more than doubled to $167 million.
The membership story is similarly staggering. SoFi added a record 1.1 million members in the period, bringing its total to 14.7 million -- up 35% year over year. That marked a third consecutive quarter of 35% member growth.
Further, total loan originations hit a record $12.2 billion, with student loan volume more than doubling and home loan volume up nearly 2.4 times year over year.
CEO Anthony Noto pointed to the breadth of the company's progress on SoFi's first-quarter earnings call, describing the period as the company's "18th consecutive quarter of the Rule of 40 with a score of 72, reflecting 41% revenue growth and 31% EBITDA margins." The Rule of 40 combines a company's revenue growth rate and profit margin into a single figure, with anything above 40 generally considered healthy.
Still, not everything was perfect.
The technology platform business -- which includes Galileo, SoFi's banking-as-a-service unit serving fintechs and other partners -- saw revenue decline 27% year over year to $75 million. Management attributed the drop to a large client that fully transitioned off the platform by the end of 2025. While management expects sequential recovery in the segment, its softness has been a wrinkle in an otherwise pristine story.
Layered on top of all this is the lingering shadow of a March short-seller report from Muddy Waters Research, which accused SoFi of accounting irregularities and inflated profitability. SoFi pushed back forcefully, calling the report "factually inaccurate and misleading" and saying it would explore legal action.
Valuation is still the main issue
Even with all of that working against the stock, the bigger reason I'd steer clear here is plain old valuation.
Management is guiding for full-year 2026 adjusted earnings per share of about $0.60. With shares hovering near $16, that puts the stock at about 27 times this year's expected earnings. Sure, that's a meaningful discount to where SoFi was trading three months ago. But it's still a substantial premium for a business whose biggest growth driver is consumer lending -- a category historically vulnerable to economic downturns and rising defaults.
Even on a price-to-tangible-book-value basis, the stock trades at about 2.2 times its $7.21 tangible book value per share. That's rich for any bank, even one growing as quickly as SoFi.
But the medium-term targets management has laid out, which call for adjusted earnings per share to compound at 38% to 42% annually through 2028, are ambitious. To get there, however, SoFi will need to keep adding members at a brisk pace and avoid a meaningful uptick in personal loan losses.
To that last point, the personal loan annualized charge-off rate did tick up to 3.03% in the first quarter from 2.80% in the prior quarter. Though management has emphasized that recent loan vintages are tracking well below the 7% to 8% net cumulative loss assumption it has long stood behind.
Overall, SoFi's business looks great. Members keep coming, and fee-based revenue is becoming a bigger slice of the pie. But valuation arguably remains an issue, even after the stock's sell-off.
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Daniel Sparks and his clients have no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
