SoFi Technologies (NASDAQ:SOFI) stock continues to flounder due to recent developments.

SOFI stock moved back to penny stock levels after the Biden Administration’s latest extension of the student loan moratorium further delayed a rebound for its now-dormant legacy student loan refinancing business.

That’s not all. The fintech firm may be facing headwinds related to another part of its business: its cryptocurrency operations. As InvestorPlace’s David Moadel recently discussed, the company is now in the crosshairs of the Senate Banking Committee, which is now scrutinizing the crypto industry following the FTX blowup.

Despite these near-term issues, many investors remain optimistic about this former high-flier’s longer-term prospects. However, it’s not wise to follow their lead, and buy this stock as it remains out of favor. Taking a closer look, it’s clear that the risks of going contrarian with this name well exceed the potential reward.

SOFI Stock and its Recovery Chances

While the drama surrounding student loans has negatively affected the performance of SoFi Technologies stock, the company isn’t facing any sort of “game over” moment because of it. Whether or not the Supreme Court rules in the Biden Administration’s favor when it comes to the legal battle over its student loan forgiveness plan, the current pause will eventually come to an end.

Repayments will resume, and demand for refinancing student loans with third parties will return. However, in contrast to the argument investors bullish on SOFI stock have laid out, I wouldn’t assume that an end to the pause will produce a massive rebound for shares.

As I’ve discussed previously, revenue/earnings forecasts already factor-in a post-moratorium re-acceleration of revenue growth. Revenue could climb in a big way over the next few years, as the company not only experiences a rebound in student loan refinancing volume but benefits from cross-selling other financial services to these new customers.

The issue, though, is that this may not translate into big profitability improvements. At least, based on current long-term earnings forecasts. This will limit SOFI’s ability to make a return to prices anywhere near prior levels.

Two Reasons Why a Big Rebound May Be a Tall Order

It’s not as if there’s zero chance SOFI stock re-hits past lofty price levels and hits new highs a few years down the road. However, all things considered, achieving this is easier said than done. First, there’s the issue regarding SoFi’s future profitability.

Sell-side forecasts call for the company to report negative earnings per share (or EPS) in 2023 and 2024. The company likely needs to beat this forecast by a wide margin, just to kick off a recovery.

A big jump in earnings could arrive in 2025, based on the sole analyst EPS forecast for that year (35 cents), but even hitting that forecast may fail to be enough to send SOFI to materially higher prices. Second, the extent of a rebound depends on how the market values SOFI once it is consistently profitable.

With its purchase of Golden Pacific Bancorp earlier this year, giving this financial institution a national bank charter, SoFi is more like a bank than other fintech companies.

Bank stocks trade at lower multiples than fintech pure-plays. Even if the market gives it a fintech valuation, keep in mind recent multiple compression for this sector. PayPal (NASDAQ:PYPL), for instance, trades for only 18.4 times earnings today.

The Bottom Line

Reiterating my past take on SoFi Technologies, I continue to believe SoFi Technologies is not a strong opportunity, given its limited upside potential. At best, if it manages to ride out today’s challenges, and begins to report earnings in line with long-term estimates, a return to high single-digit prices may be possible.

Taking into account the time necessary to make this tiny bounce back, it’s simply not worth wasting your time/risking your capital on. Previously, I’ve mentioned that downside risk may be limited, given the stock’s tangible book value of $3.34 per share.

Now, in light of a likely longer timeframe to profitability (due to the student loan pause), there may be a greater level of downside risk.

There are more promising growth plays out there. Stick to them, and continue to skip out on SOFI stock.

SOFI stock earns a D rating in Portfolio Grader.

On the date of publication, neither Louis Navellier nor the InvestorPlace Research Staff member primarily responsible for this article held (either directly or indirectly) any positions in the securities mentioned in this article.