To The Moon

Like many other tech and fintech stocks this year, the one-stop financial services company SoFi$SoFi Technologies Inc.(SOFI)$ (NASDAQ: SOFI)has seen its stock price hammered amid a difficult macro outlook. The stock is down more than 66% this year, as the market takes a much harsher approach to growth valuations. While SoFi has continued to grow, it's still far away from profitability and its guidance for this year has disappointed investors, pushing it to new lows. Is now the time to buy?

Growing the business

In SoFi's recently reported first quarter of 2022, the company generated a loss of $0.14 earnings per share, which came in line with analyst estimates. SoFi also generated adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) of nearly $9 million and record revenue of more than $330 million, which easily beat estimates.

However, the market seemed disappointed with the company's second-quarter and full-year guidance, which seemed to come in lighter than analysts had been forecasting. Despite this, I thought SoFi produced a solid quarter that showed continued growth and progress in its initiatives amid a very difficult economic backdrop.

The company added more than 400,000 members in the quarter and now has close to 3.9 million members. It also grew total lending and financial services products to close to 5.9 million. Furthermore, SoFi's record revenue in the quarter was driven by nearly $253 million of revenue from SoFi's lending division, also a record. SoFi saw a slowdown in student loan originations in the quarter after the federal government announced that it had once again extended thestudent loan moratorium. But that was offset by $2 billion of personal loan originations, as SoFi continues to keep growing that business nicely.

Furthermore, the company continued to execute on its financial services productivity loop strategy in which it uses products in its financial services division such as its online brokerage, SoFi Invest, and its checking and savings accounts to draw users into the SoFi ecosystem. Eventually, the goal is to cross-sell customers with more profitable lending products. SoFi CEO Anthony Noto said the number of cross-bought products in the quarter increased 22% year over year.Making progress on key initiatives

SoFi continued to push ahead with key initiatives in the first quarter. As you can see in the chart above, SoFi Invest is at the top of the funnel for drawing new members into the SoFi ecosystem. As such, I think the company should make the online brokerage as attractive as possible to capitalize on customer acquisition. It already offers customers the ability to buy 30 different cryptocurrencies to trade and the ability to pay zero fees on crypto trades when members invest part of their direct deposits. Noto said the company launched margin lending on SoFi Invest and plans to also launch extended trading hours and options trading later this year. The better this product is the more new members SoFi can win.

Earlier this year, SoFi also finally closed its acquisition of Golden Pacific Bancorp and the bank charter that came with it. As a bank, SoFi can now bring all of the deposits it has gathered from its SoFi Money cash management account onto its balance sheet to help it fund loans. SoFi is also now offering a checking and savings account that is paying a high annual percentage yield of 1.25% and Noto said the bank is now bringing in $100 million in deposits per week. SoFi also now plans to hold loans on its balance sheet for six months on average instead of three, which will allow it to earn more from its loans by collecting monthly interest payments for longer.

Finally, SoFi continues to develop its tech businesses with Galileo, its payment processing and digital banking infrastructure offering, and Technisys, its core bankingtechnologybusiness that SoFi only acquired earlier this year. Both are complementary and present a different kind of business than consumer lending in that they provide banks and fintech companies with the critical infrastructure they need to provide banking services. Noto said these two offerings together can become high-margin businesses.

Is it time to buy?

I do really like what SoFi is building, but one of the reasons I have been cautious and have not bought the stock yet is because it's been difficult for me to understand what a good entry point is. Analysts on average do not predict SoFi to be profitable this year or next. And despite the huge drop this year, SoFi trades at close to 50 times its projected 2022 adjusted EBITDA guidance. Once the student lending moratorium ends that should help, as should ramping up the Galileo and Technisys business.

I am definitely close to being a buyer here and do think SoFi can be a long-term winner. However, it's important for investors to understand that just because the stock looks cheap trading around $5 it could certainly still go lower considering its valuation.