3 Reasons to Buy SoFi During the Tech Sell-Off

As gut-wrenching as the tech sell-off in 2021 has felt for many (including myself), it is essential to stay grounded and carry on as best as possible. Volatility is ultimately the price we pay for outsized returns -- and with young growth stocks, this uncertainty only amplifies.

However, should all else remain the same in your life financially, these sell-offs can be premier opportunities to add up-and-coming companies to your portfolio.

With this in mind, let's look at three key reasons why SoFi Technologies (SOFI -2.83%) is an outstanding growth stock to buy in today's market conditions.

Image source: Getty Images.

1. SoFi has growth optionality

Having started its growth story as solely a student loan refinancing platform, SoFi Technologies has quickly multiplied its growth avenues, creating three distinct business segments:

1. Lending: Made up of student, personal, and home loans.
2. Technology Platform (Galileo): An application programming interface (API) and payment platform for fintech.
3. Financial Services: Includes SoFi Invest, Money, Credit Card, Lantern by SoFi, Protect, and more.

Despite seeing its student loan origination volume halved by the Cares Act passing in 2020 and later extending in 2021, SoFi expects to post $1 billion in revenue for 2021, compared to $621 million in 2020. This increase represents a 61% growth rate year over year and highlights how remarkably well its personal loans business is growing, with volumes rising an astonishing 167% for the third quarter.

Furthermore, home loan origination volumes have nearly quadrupled when comparing 2018's totals to the trailing 12 months for SoFi. Once student loan relief potentially ends, the company's lending unit could truly begin firing on all cylinders.

However, as promising as SoFi's lending core is to its current operations, its Galileo and Financial Services segments could ultimately be the company's very long-term growth drivers.

Galileo, for example, saw sales rise 80% year over year in the third quarter, and it looks beautifully positioned to benefit from the ongoing movement toward fintech. Galileo helps enable many of today's up-and-coming fintechs to operate effectively through its payment platform and API, making its long-term potential to SoFi massive and complicated to decipher this early on.

Finally, the Financial Services segment nearly quadrupled its revenue during Q3, year over year, building on a small base of $3 million in revenue. What makes this segment of importance to investors is that if SoFi can attract members to sign up for any of its wide variety of products, it has historically seen high levels of cross-buying into other products, including lending.

This cross-buying creates a strong flywheel effect, increasing SoFi's overall membership value and strengthening its community.

2. SoFi has sustained high growth

Not only does SoFi offer investors multiple young lines of business to generate new revenue growth with, it is also still seeing high overall growth rates despite the student loan headwinds previously mentioned. Consider the following table:

Data from SoFi Q3 2021 Earnings Presentation. YOY = year-over-year.

Outside of the company's more mature lending operations, SoFi is seeing blistering growth rates across every vital metric. However, these year-over-year changes are exciting to investors because they have accelerated from 2019's levels -- a rare feat for any newly public company.

Thanks to the growth within these metrics, SoFi's 2021 sales are poised to quadruple compared to just three years ago.

Furthermore, SoFi's adjusted earnings before interest, taxation, depreciation, and amortization (EBITDA) have been positive for the last five quarters and it has improved for the previous four years. While adjusted EBITDA is not the most trustworthy of profitability metrics to use, in SoFi's case, it does show consistent and steady improvement.

3. Sofi has a recently discounted valuation

The final reason that an investment in SoFi looks appealing right now is simply its discounted valuation, thanks to the broad tech growth stocks sell-off in 2021. After dropping by more than 40% from its 52-week highs, the stock currently trades at approximately 13 times sales.

Compared to peers like PayPal Holdings and Block, with their price-to-sales ratios of 9 and 6, respectively, SoFi's sales seem reasonably priced -- especially considering its incredible growth rates. Furthermore, SoFi's market capitalization, or company price tag, of $12 billion is just a fraction of its much larger peers', leaving it ample room to continue carving out its niche in the fintech industry.

Investor takeaway

Thanks to these three reasons, SoFi Technologies is one of my favorite stocks as we begin 2022. Offering a powerful blend of high growth, optionality potential, and a discounted price, SoFi has significant multibagger prospects over the next decade and beyond.