SoFi Technologies (NASDAQ:SOFI), like other speculative growth stocks, has rallied thanks to the latest signs that inflation is easing. In recent trading days, SOFI stock has climbed back out of “penny stock territory,” (under $5 per share).

Shares could also continue to inch higher over the next two weeks or so, ahead of the fintech firm’s next quarterly earnings release. However, if you’re viewing the stock’s latest strong performance as a sign of a recovery in motion, you may want to think otherwise.

Sure, in the near term, SOFI could potentially be a profitable trade, although I wouldn’t assume that shares are en route to rally post-earnings.

That said, in terms of this stock being a strong long-term opportunity, let me reiterate my view that the upside potential for this stock is limited, largely due to a factor that many investors and analysts may consider an advantage for the underlying company.

SOFI Stock and Its Newfound Status

Coming of age starting in the 2010s, and especially during the pandemic, fintech firms benefited from a favorable economic and stock market environment.

Yet, as we’ve seen over the past year, that environment has pivoted from boom times to challenging times. High inflation, higher interest rates, and slowing economic growth leaves many fledgling startups, many of which still operate in the red, vulnerable.

Those bullish on this fintech believe that it is in solid shape to ride out the current downturn. In a recent article, InvestorPlace’s David Moadel quoted Mizuho sell-side analyst Dan Dolev, who remains bullish on SOFI stock, believing that “there’s just more opportunity than risk.” A big reason why Dolev believes there’s limited downside with SoFi is due to its newfound status as a bank.

I agree that SoFi’s status as a bank could limit the downside. If economic conditions worsen this year, SoFi may face fewer liquidity issues compared to fintechs that are unable to take in deposits.

In theory, I can also see why operating as a bank could help with future growth, considering the opportunity to cross-sell financial services to depositors. However, as I detail below, these advantages could come at a price.

What a Bank Stock Valuation Means for Future Returns

Obtaining a bank charter may have been a wise move strategically, yet it’s a decision that could impact potential returns for investors buying SOFI stock today. It all has to do with the valuation of bank stocks versus the valuation of non-bank fintech stocks.

Run a screener on banking stocks, and you’ll see what I mean. Even the highest-quality, best-run banks, at most, trade for between 10 and 15 times earnings. Many bank stocks sell at lower earnings multiples, with forward P/E ratios in the single digits. On the other hand, it’s common for non-bank fintechs to trade for 20-30 times earnings, sometimes even higher.

Yes, SoFi is growing at a rapid pace. Even as it matures, and becomes profitable, it could still continue to grow at a faster rate than, say, an established bank like Bank of America (NYSE:BAC). However, that may only enable the stock to sustain a multiple in the high teens.

Ergo, for this stock to re-hit past price levels, SoFi needs to experience not only a move to profitability but a massive increase in profitability once it moves beyond breakeven. Based on the current long-term earnings forecasts, this may be a tall order.

Bottom Line on SOFI

SoFi Technologies is only expected to become profitable by 2024. Even in 2025, forecasts call for earnings of just 35 cents per share. In order to re-hit past price levels, earnings will really need to keep climbing. For instance, this bank may need to report annual earnings of 50 cents per share in order to re-hit $10 per share.

Sure, hitting earnings of 50 cents, $1, or even more, may be ultimately attainable, but it may take many years for this so-called “banking disruptor” to hit these earnings levels and make this move back above sub-$10 per share prices.

Compared to other growth plays, annualized returns from a long-term SOFI stock position could prove underwhelming, if its key strength (being bank) becomes a weakness (a bank stock valuation). Keep this in mind if you’re mulling making it a buy today.

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.