SoFi Technologies (SOFI -1.22%) plays a leading role in the financial technology (fintech) space right now, with the company’s laundry list of financial services ranging from savings accounts and loans to even crypto trading.
The company’s early moves into fintech and its ability to expand its services and customer base have made its stock a must-have among many investors, boosting it more than 230% over the past three years. Those gains are more impressive when you consider that even some tech giants like Microsoft, which are benefiting from an artificial intelligence boom, have seen their share price double over the period. Impressive, sure, but far behind SoFi’s gains.
The question now for potential investors is whether the stock can continue to put up staggering returns that could set an investor up for life. There’s no question that SoFi has been successful, but it’s doubtful the stock will continue its rapid rise. Here are three reasons why.
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1. SoFi is already priced for perfection
The downside of SoFi’s share price rising so quickly is that it has significantly raised its valuation, making it priced for perfection. It has a price-to-earnings ratio (P/E) of about 50, much higher than the average P/E multiple of 29 for the S&P 500 index.
Sure, most stocks across nearly every sector look historically expensive right now. But SoFi is still frothy, even in the current market. Any earnings or revenue misses in an upcoming quarterly report or negative news could cause the stock to fall.
Buying it now means you’re paying a premium for the stock, and with expectations riding high, there will be a point when quarterly results don’t match investors’ expectations.
2. Tariffs aren’t in the rearview mirror yet
News moves so fast these days that it can seem like the tariffs the Trump administration announced in April are in the distant past. But the administration still has many tariffs in place and recently announced new ones.
The first wave of tariff uncertainty sparked a massive sell-off in the market, and SoFi’s shares fell too, tumbling 17% in just a few days.
While stocks have since rebounded, the fact remains that investors know high tariffs could be bad for the economy. Inflation ticked up slightly higher to 2.7% in June, with at least some of the blame going to tariffs. If inflation continues to rise, and Americans cut back on their spending, that could significantly affect SoFi’s growth.
The fintech relies on its members spending money, taking out mortgages and personal loans, and using their credit cards. If the economy slows because of tariffs, then it’s likely some SoFi members will stop using the company’s products as frequently. And, in the worst-case scenario, a significant economic slowdown or recession could make it difficult for some members to continue paying on their loans.
3. Fintech is fiercely competitive
All companies have competitive risks, but the fintech sector takes competition to a new level. Consider the companies that have at least one product similar to SoFi’s, including Wells Fargo, Apple, Block, Robinhood, Klarna, PayPal, and many more.
Financial services used to be what banks did. Now, tech companies offer financial services, and even have bank charters, like SoFi. And while SoFi’s services have been lucrative — its earnings soared 200% in the most recent quarter to $0.06 per share — it also means that small fintech companies and large tech companies are constantly creeping into each other’s territory.
This may be one of the most significant reasons why SoFi may not be the best stock to set you up for life. Too many other companies offer great financial services to customers through sleek and easy-to-use apps. While it has built some advantages in fintech by offering a variety of services, I think it’s still too early to assume that its competition can’t eventually take away some of its members.
To be clear, I don’t think SoFi is a bad investment. I just don’t think it’s a stock that will set you up for life. If you’re inclined to buy the company’s shares right now, I would start with a small position. And if the stock gives up some of its gains, then maybe add a little more. But with the shares up 185% over the past 12 months, the likelihood of similar returns looks slim.
Wells Fargo is an advertising partner of Motley Fool Money. Chris Neiger has positions in Apple. The Motley Fool has positions in and recommends Apple, Block, Microsoft, and PayPal. The Motley Fool recommends the following options: long January 2026 $395 calls on Microsoft, long January 2027 $42.50 calls on PayPal, short January 2026 $405 calls on Microsoft, and short June 2025 $77.50 calls on PayPal. The Motley Fool has a disclosure policy.
