These 3 Beaten-Down Financial Stocks Could Have Farther to Fall

Financial stocks, like the stock market in general, have performed well this year. Investors continue to anticipate positive changes like lower interest rates, and a possible normalization of macro issues like high inflation. However, while many financial stocks have rallied this year, there are a few exceptions.

Namely, shares in companies with industry or company-specific issues. That's the situation with the following three financial stocks: Chime Financial (NASDAQ: CHYM), Progressive (NYSE: PGR), and Upstart Holdings (NASDAQ: UPST).

Each one has moved lower since the start of the year, and each one may be at risk of further price declines, both through the rest of 2025, and possibly, into 2026.

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Chime Financial could fail to make profitability progress

Chime Financial, a fintech well known for its mobile banking platform, went public back in June. The initial public offering (IPO) was at $27 per share, the stock debuted on the Nasdaq exchange at $43 per share, but in more recent months, shares have experienced a steady slide to lower prices.

Right now, the stock changes hands at around $19 per share. Yet while this pullback may at first seem like an opportunity to buy the dip, keep in mind that expectations about profitability progress may remain high. Estimates call for Chime to reach near-breakeven in 2026, with losses per share going from $4.24 to just $0.28 per share.

However, expectations about future performance represent much of Chime's current $7 billion market cap. Shares could be in for another big de-rating if subsequent results fail to meet expectations.

Progressive may experience a further valuation drop

Progressive shares recently tanked after the company reported lower-than-expected earnings. The main reason for this earnings miss was a one-time event. Insurance regulators in Florida have mandated that the auto insurer issue a rebate to its customers in Florida, due to underwriting profits from 2023 to 2025 that exceeded statutory limits.

However, even as charges related to this will have just a temporary impact on Progressive's bottom line, another issue, increased competitive pressures, may persist. As the sell-side analyst team at Morgan Stanley recently argued in a downgrade of the stock to underweight, increased competition could impact pricing.

In turn, concerns about a decrease in Progressive's economic moat may drive a further drop in valuation. Right now, Progressive trades for around 15 times forward earnings. Compare this to public peers like Allstate, which trades at a forward P/E of less than 10.

Credit market concerns are a key risk for Upstart Holdings

Upstart Holdings shares have sold off lately, mostly because of the recent bankruptcy of Tricolor, a subprime auto lender. Concerns are rising that consumer lending companies, Upstart included, may begin to experience worsening loan performance.

Sure, Upstart isn't a lender, per se. Rather, the company licenses AI-based loan underwriting technology to third-party banks. The company also originates loans for resale into the secondary market. Still, if the consumer lending market worsens, Upstart could experience issues, such as decreased revenue from its lending partners.

Or worse, the company could start finding itself unable to sell originated loans to third parties. Trading for a pricey 39 times forward earnings, if Upstart has to start walking back expectations for future growth and earnings, shares could take another tumble.

Thomas Niel has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Progressive and Upstart. The Motley Fool has a disclosure policy.