SoFi stock price has imploded: will it rebound?

SoFi stock price continued its strong downward trend this year, moving to its lowest level since July last year.

It has slumped by over 42% from its highest level in November last year, and technical analysis suggests that it has more downside to go.

SoFi stock price technical analysis points to more downside 

The daily timeframe chart shows that the SoFi share price has crashed in the past few months, moving from a high of $32 to the current $19.

This retreat happened after the stock formed a head-and-shoulders pattern, a common bearish reversal sign in technical analysis. It moved below the neckline at $25 in January.

The stock moved below the 50% Fibonacci Retracement level at $20.75. Also, it formed a death cross pattern on February 4 as the 50-day and 200-day Weighted Moving Averages (WMA) crossed each other.

The Average Directional Index (ADX) has soared to 35, its highest level in August last year. It has remained below the Supertrend indicator, a sign that the downtrend is gaining momentum.

Therefore, the SoFi share price will likely continue falling, potentially to the 61.8% Fibonacci Retracement level at $18. A drop below that level will point to more downside, potentially to the psychological level at $15.

SoFi stock chart | Source: TradingView 

SoFi short interest rises as analysts maintain bullish outlook 

The main reason why the SoFi share price has collapsed this year is the growing concerns about dilution after it raised capital. This dilution has led to a surge in outstanding shares, which have moved to over 1.27 billion from 1.10 billion last year.

However, the company has defended the two fundraisings that raised $3.3 billion in gross proceeds. In a note, the company said that the capital will help to enhance its ability to drive innovation and pursue organic and inorganic growth opportunities.

The management also noted that the cash helped it to repay its expensive debt, which was charged a 5.23% interest. As a result, it now expects to continue generating more profits in the future by reducing its interest expense.

SoFi stock price has also crashed because of the ongoing crypto market plunge that has affected Bitcoin and most altcoins. The crash means that its upcoming crypto business will not generate substantial revenue and profits.

Additionally, many investors have taken the opposite direction as the short interest has continued growing in the past few months. The short interest has jumped to nearly 10%.

This short-selling is also likely because of its expensive valuation, with the forward price-to-earnings ratio being 32, higher than the sector median of 10.

Still, on the positive side, the company’s business is doing well, with its adjusted revenue rising by 37% in the fourth quarter to over $1 billion. Its adjusted EBITDA rose to $318 million, while the fee-based revenue soared to $443 million.

Wall Street analysts believe that the company has more upside going forward, with the first quarter revenue rising by 36% to over $1.05 billion. The annual revenue is expected to rise by 28% to over $4.63 billion, followed by $5.65 billion next year.

SoFi’s business is also highly diversified, making it a financial supermarket, where one can access all solutions, including borrowing, insurance, investing, and trading.