As heartbreaking as the tech sell-off in 2021 has been felt by many (myself included), it’s critical to stay grounded and keep going as best as possible. Volatility is ultimately the price we pay for outsized returns – and with young growth stocks, that uncertainty only gets worse.
However, if everything else stays the same in your financial life, these sales can be great opportunities to add emerging businesses to your portfolio.
With that in mind, let’s take a look at three main reasons why SoFi Technologies (NASDAQ: SOFI) is an exceptional growth stock to buy under current market conditions.
1. SoFi has a growth option
Having started its history of growth as a student loan-only refinancing platform, SoFi Technologies quickly multiplied its lines of growth, creating three distinct business segments:
- Ready: Composed of student, personal and real estate loans.
- Technology platform (Galileo): An application programming interface (API) and a payment platform for fintech.
- Financial services: Includes SoFi Invest, Money, Credit Card, Lantern by SoFi, Protect, and more.
Although it saw its student loan issuance volume cut in half by the passage of the Cares Act in 2020 and later extending into 2021, SoFi expects to generate $ 1 billion in revenue for 2021, up from $ 621 million in 2020. This increase represents a 61% year-over-year growth rate. and highlights how remarkably its personal loan business is growing, with volumes up astonishing 167% for the third quarter.
In addition, mortgage origination volumes nearly quadrupled when comparing 2018 totals to the past 12 months for SoFi. Once student loan relief potentially ends, the company’s loan unit could really start to fizzle out.
However, as promising as SoFi’s lending core is for its current operations, its Galileo and Financial Services segments could ultimately be the engines for the company’s very long-term growth.
Galileo, for example, saw its sales increase 80% year-over-year in the third quarter, and it seems ideally positioned to benefit from the ongoing move towards fintech. Galileo enables many of today’s emerging fintechs to operate efficiently through its payment platform and API, making its long-term potential for SoFi massive and complicated to decipher from the start.
Finally, the financial services segment nearly quadrupled its revenue in the third quarter year over year, building on a small base of $ 3 million in revenue. What makes this segment important to investors is that while SoFi can attract members to sign up for one of its many products, it has historically experienced high levels of cross-buying in other products, including loans.
This cross-buying creates a powerful ripple effect, increasing the overall value of SoFi’s membership and strengthening its community.
2. SoFi sustained high growth
Not only does SoFi offer investors several young lines of business with which to generate further revenue growth, but it also has high overall growth rates despite the previously mentioned student loan challenges. Consider the following table:
|Metric||Total in Q3 2021||YOY change|
|Loan products||1 million||15%|
|Financial services products||3.2 million||179%|
|Galileo Accounts||89 million||80%|
Outside of the company’s more mature lending operations, SoFi is experiencing sky-high growth rates across all vital parameters. However, these year-over-year changes are exciting for investors as they have accelerated from 2019 levels – a rare feat for any new public company.
With the growth of these metrics, SoFi sales in 2021 are poised to quadruple compared to just three years ago.
In addition, SoFi’s adjusted profit before interest, taxes, depreciation and amortization (EBITDA) has been positive over the past five quarters and has improved over the previous four years. While Adjusted EBITDA is not the most reliable measure of profitability to use, in the case of SoFi, it shows steady and steady improvement.
3. Sofi has a recently updated valuation
The latest reason why an investment in SoFi looks attractive right now is simply its discounted valuation, thanks to the massive sell off of tech growth stocks in 2021. After falling more than 40% from its 52-week highs, the stock is currently trading at around 13 times sales.
Compared to peers like PayPal funds and To block, with their price-to-sales ratios of 9 and 6, respectively, SoFi’s sales appear reasonable, especially given its incredible growth rates. Additionally, SoFi’s market cap, or company price, of $ 12 billion is only a fraction of that of its much larger peers, leaving it ample room to continue to carve out. a place in the fintech industry.
Takeaway for investors
Thanks to these three reasons, SoFi Technologies is one of my favorite stocks at the start of 2022. Offering a potent mix of high growth, option potential and reduced price, SoFi has significant multi-bagging prospects in the world. over the next decade and beyond.
This article represents the opinion of the author, who may disagree with the âofficialâ recommendation position of a premium Motley Fool consulting service. We are motley! Challenging an investment thesis – even one of our own – helps us all to think critically about investing and make decisions that help us become smarter, happier, and richer.