SoFi Technologies (SOFI) shares fell about 3% on Monday after Keefe, Bruyette & Woods (KBW) cut its price target to $15 from $16 and reiterated its Underperform rating. SoFi is scheduled to report third-quarter earnings on October 27.
KBW analyst Timothy Switzer said rising interest rates during the third quarter, combined with growth in SoFi’s balance sheet, could create a headwind of more than $1 billion. He attributed the pressure to the company’s fair-value accounting practices, which could make it harder to meet guidance without using more capital. Switzer expects this pressure to weaken the revenue mix and reduce capital reserves.
KBW’s base case still assumes SoFi will meet consensus estimates and its own quarterly guidance. However, the firm remains cautious ahead of the earnings report because of the capital-related risks.