SoFi's Selloff Amplifies Debate on Dilution vs. Operational Strength

What happened

SoFi Technologies' stock sold off sharply after its Q4 2025 earnings, despite reporting record adjusted net revenue of $1.013 billion and achieving its ninth consecutive quarter of GAAP profitability, largely due to market concerns over a $1.5 billion equity raise that caused dilution and overshadowed strong results. A recent Seeking Alpha article frames this as an overreaction, highlighting that deposits grew to $38 billion for cheaper funding and citing a buy rating with a $26.87 average price target, suggesting an attractive risk/reward opportunity. However, the DeepValue master report critically notes that SoFi's profitability narrative relies heavily on non-GAAP exclusions and faces near-term execution risks, such as maintaining net interest margin (NIM) above 5% and sustaining Loan Platform Business (LPB) revenue at $194 million quarterly. The selloff reflects deeper investor skepticism about dilution's impact on per-share growth and vulnerabilities like Technology Platform churn, where enabled accounts fell 23% YoY after a large client exit. Thus, the market is now balancing optimism over deposit-led funding and cross-sell momentum against fears of operational slippage and capital inefficiency.

Implication

Investors should consider scaling into positions only if SoFi delivers on its ~$1.04 billion Q1 2026 revenue outlook and reiterates NIM guidance above 5%, as these are critical to validating the bank-led funding advantage. The $1.5 billion equity raise adds a per-share earnings hurdle, meaning growth must outpace dilution to justify higher valuations, making capital allocation discipline essential. Key risks to monitor include sequential deposit declines, which could undermine funding stability, and any stalling in LPB revenue or cross-sell metrics, as these would break the fee-based growth thesis. Positively, sustained deposit growth and LPB partner conversions could drive fee revenue, supporting a re-rating toward the $24-$30 base-to-bull scenario range. Therefore, a cautious, data-driven approach is warranted, with exits triggered by misses in quarterly checkpoints or early warning indicators like funding mix regression.

Thesis delta

The selloff has not fundamentally shifted the thesis that SoFi is pivoting to fee-based earnings with a deposit-led model, but it has heightened the importance of execution over the next 3-6 months. The delta lies in the increased scrutiny on dilution from the equity raise, which now adds a per-share growth burden that must be offset by operational outperformance, particularly in Q1 2026 revenue and NIM sustainability. Any deviation from these key performance indicators could accelerate downside toward the bear case of $14, emphasizing a higher-stakes environment for investors.