Is SoFi a Buy, Sell, or Hold in 2026?

Since the start of 2025, the share price of SoFi Technologies (NASDAQ: SOFI) has jumped over 75%. This strong price appreciation outpaced major indexes like the S&P 500 (up 17% over this same time frame).

But new and existing investors are generally more interested in future potential than past performance. Can shares in this fast-growing fintech continue to perform well over the next 12 months? This question is especially relevant, as the stock has traded sideways since September, and its current rich valuation of over 45 times forward earnings may suggest to some that it's become overvalued relative to other financial technology stocks.

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What's driving investor caution about SoFi Technologies right now?

Earlier this year, SoFi Technologies was on a tear. Investors showed zero hesitation bidding up the company's shares last summer when SoFi reported high revenue, membership, and adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) growth, as well as a move toward consistent positive GAAP (generally accepted accounting principles) earnings.

So, then why has this stock been treading water since September? After all, fiscal results continue to be strong. During the quarter ending Sept. 30, 2025, SoFi Technologies again exceeded expectations. Revenue, membership, and adjusted EBITDA were up 38%, 35%, and 49% year over year, respectively, only slightly below the levels of growth reported during Q2 2025.

While the growth story stayed largely intact (that's good for long-term investors), a few items have negatively affected shares in the short term.

For one, Cathie Wood's ARK Invest family of exchange-traded funds (ETFs) recently cut exposure to the stock, which perhaps hurt near-term price performance. Then, earlier this month, SoFi Technologies announced plans to increase the share count in hopes of raising $1.5 billion. This raised concerns about share dilution, and the news led to a more than 7% share price drop when announced on Dec. 5.

SoFi's rich valuation can persist -- here's how

Alongside concerns about dilution and news of a prominent investor selling the stock, valuation is likely another factor weighing on shares lately. Even as SoFi reports higher levels of growth than larger mature competitors like PayPal (NASDAQ: PYPL), its valuation premium may seem questionable.

PayPal currently trades at a forward price-to-earnings (P/E) ratio of just over 11.5. Block (NYSE: XYZ), another larger mature SoFi competitor, trades for around 27 times forward earnings. Sofi's current forward P/E is 46.

Beyond relative valuation, there may be other valid reasons why SoFi should trade at a lower forward multiple. For instance, recent reports about rising personal debt defaults suggest that this could be a risk not fully accounted for in SoFi's valuation. Personal lending is a key pillar of this fintech's overall business.

Then again, it may be too soon to say that this will seriously impact SoFi's financial performance in the coming year. For now, the growth story continues, with growth decelerating somewhat but still exceeding sell-side forecasts. As long as this trend persists, a premium valuation is likely to remain sustainable.

Recent price action could work in your favor

Don't get me wrong. It may prove difficult for SoFi Technologies to experience further valuation expansion. However, as long as earnings growth remains high, the stock may have the potential to continue climbing, albeit only in line with this earnings growth.

For instance, sell-side analyst estimates call for SoFi's earnings per share (EPS) to come in at $0.37 this year and $0.58 in 2026, a nearly 57% increase. Even if the market slightly dials back its expectations for earnings growth beyond 2026, by anticipating 25% to 30% earnings growth in future years, the stock could still deliver outsize gains relative to the market.

With this in mind, SoFi Technologies' recent price action may work in your favor. Whether you buy now or wait for further weakness, current levels may be the prelude to another wave of new highs if better-than-expected growth persists over the next four fiscal quarters.

Thomas Niel has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Block and PayPal. The Motley Fool recommends the following options: long January 2027 $42.50 calls on PayPal and short December 2025 $75 calls on PayPal. The Motley Fool has a disclosure policy.