SoFi's loan-portfolio fair value fell, likely by billions, as interest rates rose, and default rates probably rose again; with a $19 fair value estimate versus a $15 price, it offers more than 24% upside over 12-18 months and is upgraded to a buy despite above-average risk.

Sofi's stock fell by 12% last month, capping a difficult year . The stock is down more than 46% this year. As for last month, the main reason behind the decline in Sofia's stock was the rise in interest rates.

Therefore, I wanted to clarify the relationship here, how high interest rates pose a challenge for Sophie, share my assessment of the stock's fair value , and share my opinion on the company's performance at these levels.

You can see the price movement of "Sofi" stock here, where it has fallen by more than 12% in the last month, and since the beginning of the year it has fallen by 41.83%. If you recall, at the beginning of 2026, I warned investors that Sofia's stock was overpriced. It was overvalued at around $30 per share.

I kept reminding investors that I saw the stock as overvalued until it dropped to around $18. Then I upgraded the "Sofi" stock to become a buying opportunity.

Of course, the stock has fallen even lower, reaching $15. So, the stock is still low after I upgraded it to a buy rating, but I only raised it to a buy rating after it dropped to $18.

A similar thing happened last year when the stock was valued at less than $20, and in moments it was trading close to $10.

I have always been optimistic about the long-term prospects of this company, but at times the valuation has been ahead of its time . So, I rated it as an excellent buying opportunity last year before it rose to $30, and after the stock gained about 85%, I downgraded it to "hold," and now I 've upgraded it again.

So, what is my opinion after the recent 12% drop and the rise in interest rates? Does it still represent an attractive opportunity? Well, one of the first things to note about Sophie in recent years, and especially in the last year and a half , is that its lending activity is booming .

In the second quarter of 2026, the lending sector's revenues increased by 63% compared to the same quarter of the previous year.

This is the business sector that is thriving, and it is the one that is driving results upwards. Of course, investors prefer revenues from the technology or financial services sector to grow at a much faster pace than from the lending sector, because those sectors deserve higher valuations from investors.

Those sectors are less capital-intensive. These sectors are business activities that are less similar to basic commodities. Lending is similar to traditional banking services, which do not receive outstanding ratings from investors.

However, this is the part of the business that is experiencing a great boom. It is worth noting that external lenders are very interested in purchasing loans issued by SoFi.

This is a more profitable form of lending business management , which is what SoFi has invested in for almost the past six quarters. SoFi sells many of those loans it issues to third parties, but it also retains a significant proportion of the loans in its portfolio.

It now has over $44 billion in outstanding loan principal on its balance sheet . Therefore, the total fair value of these loans is now $46.6 billion. This is the value of the loans in its portfolio as of the end of its last completed quarter, which was on June 30, 2026.

Since then , interest rates have risen significantly. When interest rates rise, the value of these loans decreases, right? Lenders are less interested in buying loans that SoFi made before these interest rate hikes, because they can now make loans at higher interest rates with similar risk levels.

Therefore, in order to convince investors or external lenders to buy these loans or simply to value them at fair value for accounting purposes, these values must be reduced.

Therefore, when SoFi announces its upcoming earnings results, you can estimate that the fair value of the loans on its balance sheet has decreased.

There are likely billions of dollars of decline in the fair values of loans on its balance sheet . In addition to the new loans it provided during the quarter and the impact they had, depending on the timing of those loans.

So, this is one big downside for SoFi as a result of rising interest rates. Its current loan portfolio is now worth much less, perhaps billions of dollars less. Another factor I will be watching closely when SoFi updates its next quarterly results is the default rate.

With the increasing economic headwinds over the past few months , I wouldn't be surprised if SoFi's loan portfolio default rates have risen from the previous quarter. Rates were already rising from March to June.

For personal loans, the rate increased from 4.57 to 4.77. Student loans increased from 0.69 to 0.73. I suspect the default rate has risen again in the last completed quarter.

Oil prices remained high and even rose further. Interest rates rose even higher. The labor market has slowed down . There were large layoffs in administrative jobs and higher-paying jobs.

The cost of living has increased at a greater rate than people's wages have increased. So , in general, people's financial situation has deteriorated from June 30th until today.

There was no such benefit as people had in the quarter between March and June, because we must remember that tax refunds were higher this year as a result of the extension and additional tax cuts passed by the Trump administration at the beginning of its second term.

So, there was a benefit to tax refunds between the March and June quarters, however, default rates rose due to the war in Iran and higher oil prices, and of course, the effects of tariffs are still making their way through the economy.

Thus, from this quarter until June when they announce the upcoming results, we faced all the negative effects and more. Then you no longer have that positive effect of tax refunds to help protect consumers from these negative effects resulting from some of the current administration's policy decisions.

Therefore, the weighted average default rate is likely to have increased since then. So, with rising interest rates, a lowered fair value estimate for their existing loan portfolio, and then increased default rates in that portfolio , it wasn't a good quarter for SoFi.

This is well known to investors, and it is the reason why SoFi's stock has fallen so drastically over the past month and throughout the past year. As I shared with you, SoFi has a large percentage of its loan portfolio in personal loans, which are the riskiest loans.

These are the loans that people default on first when they encounter difficulties.

It has been a difficult year for consumers. The economy is still ailing, don't misunderstand me . We are not in the midst of a collapse or on the verge of collapse, but the situation is getting worse.

When you have a company that is highly sensitive to macroeconomic conditions like SoFi, it reacts to these changes. And you will react positively if things reach a turning point and a recovery and improvement are expected, right?

Let's say there is a deal and peace between the United States, Iran and Israel in the Middle East . This positive aspect is likely to cause SoFi's stock to rise more than most other stocks.

But at the moment, the situation is deteriorating. The economy is heading downwards and SoFi is facing those headwinds.

The stock is trading at a forward price-to-earnings ratio of 18.5. I have also updated my fair value estimate for SoFi. I now feel that the company is worth $19. The current market price is $15.

Therefore, I see great upside potential here. There is more than a 24% upside potential for SoFi over the next twelve to eighteen months. Therefore, I will update this rating to make it a purchase opportunity.

I like the positive aspect here. I like the risk- reward equation here for SoFi stock. But of course, it is a situation that involves higher than average risks . This is one of the most dangerous situations you might find yourself in when buying stocks right now.