Last year was better for SoFi Technologies (NASDAQ:SOFI) stock than it should have been.

Although the high-interest rate environment created by the Federal Reserve and the resumption of student loan payments caused revenue to triple last year, SoFi’s position remains precarious.

The fintech’s stock surged 85% in 2023 due to record revenue and member growth. Lifting student loan forbearance constraints increased revenue.

To its credit, though, SoFi added nearly 480,000 new members and 847,000 new products in the third quarter, demonstrating its ability to cross-sell and retain customers.

Yet investors should note SoFi also accelerated its provision for credit losses in Q3 as the number of loans delinquent 90 days or more more than doubled from last year.

It also charges off loans when they become delinquent beyond 120 days. Year to date, it charged off $326 million worth of personal loans, student loans, and credit cards, or five times more than the $63 million it charged off last year.

This shows consumers are much worse off than they were previously. According to the New York Fed, consumer debt stands at a record $17.3 trillion and is growing. While SoFi says it will produce its first-ever GAAP profit in the fourth quarter, that does not look sustainable, at least not long-term.

A Turning Point for SoFi Stock

The Biden administration’s moratorium on student loan repayments unfairly hit private lenders. Unfortunately, not many borrowers used the three-year reprieve to save money. The U.S. personal savings rate is a meager 4.1%, less than half of the long-term 8.8% average. 

SoFi, however, used the time to expand its breadth of products offered and brought in new customers to its platform. Where student loans were its original claim to fame, SoFi now offers personal loans, credit card services, and home mortgages. It hasn’t gotten into auto loans just yet, though it offers refinancing on existing loans.

Its sleek consumer-facing digital platform makes acquiring new customers easy, but it could create problems later on. With consumers in worse shape today than they have been, an economic downturn or recession could seriously wreck SoFi’s financials.

This Year Won’t Be a Repeat

SoFi faces intense competition from other digital platforms including Affirm (NASDAQ:AFRM), Block (NYSE:SQ), PayPal NASDAQ:PYPL), and even Robinhood (NASDAQ:HOOD).

Traditional banks and financial institutions are another impediment. At least one analyst thinks it’s a problem.

Keefe, Bruyette & Woods analyst Mike Perito raised doubts about SoFi’s valuation and profitability. He argued that SOFI stock was trading at a premium compared to its peers. He also said the company would face challenges in achieving its long-term growth targets. 

Perito cut his price target on SoFi to $6.50 per share, indicating 33% downside. It marked a good time for investors to exit following last year’s runup. It sent SOFI stock careening lower on the first day of trading in 2024.

Even after the drop, the stock remains elevated across several metrics including price-to-earnings and free cash flow. The fact SoFi is only profitable on an adjusted basis as we enter a dicey year makes the stock a risky investment. Still, the potential for interest rate cuts in 2024 could provide a much-needed lift to the economy and SoFi’s shares. 

I’ve waffled on SoFi Technologies all year long. I saw it as too risky as the stock continued to rise and figured it could continue its next leg higher despite the risk just before it fell. Today I’ll maintain the fintech stock will probably surprise the market, particularly after earnings, if it reports GAAP profits. 

I don’t invest looking for short-term advantages, so I wouldn’t be a buyer here. But for more risk-tolerant investors, the downturn in the stock’s share price could be an opportunity to pick up some for a quick rebound.

On the date of publication, Rich Duprey did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.