Pagaya's Guidance Shock Validates DeepValue's Caution as Shares Plunge

What happened

Pagaya Technologies' shares have plummeted 47.7% over the past month following the release of soft 2026 guidance and announcements of tighter underwriting standards. This sharp decline reflects investor anxiety over the company's growth prospects and credit risk management, despite reported positive GAAP income. DeepValue's report highlights Pagaya's high leverage and dependence on benign credit conditions, which the new guidance directly challenges by signaling potential funding stress. The downturn indicates that the market is reevaluating the sustainability of Pagaya's recent profitability streak amid tighter underwriting and growth headwinds. This event underscores the fragile nature of Pagaya's turnaround, aligning with earlier warnings about its volatile business model.

Implication

The share plunge reinforces DeepValue's WAIT rating, with the attractive entry now potentially approaching $15 as risks materialize. Investors must closely monitor upcoming ABS deal pricing and credit performance to assess funding stress and model resilience under tighter conditions. Any further deterioration could drive prices toward the bear case of $13, while stabilization might offer a better risk-adjusted entry near the $15 target. Key near-term checkpoints include Q4 2025 results and 2026 guidance updates in April 2026, which will test Pagaya's ability to sustain GAAP profitability. Ultimately, patience is warranted until leverage improves and credit metrics confirm durability, avoiding premature positions in this volatile environment.

Thesis delta

The soft 2026 guidance and tighter underwriting represent a materialization of DeepValue's downside risks, specifically around funding access and credit performance erosion. This shifts the probability weighting towards the bear scenario, reinforcing the need for a cautious wait-and-see approach until further data confirms operational resilience. Investors should now prioritize monitoring whether Pagaya can maintain GAAP profitability and ABS funding stability amid these heightened challenges.