Attention, bargain shoppers. There's a fire sale on bank stocks following the implosion of Silicon Valley Bank (SVB), the now-defunct subsidiary of SVB Financial.

After the market closed on Friday, March 10, SVB was placed into receivership and since then many bank stocks have been falling. This includes shares of SoFi Technologies (SOFI 0.26%), which are down about 17% since Silicon Valley Bank warned investors it was having liquidity issues.

Despite both being from northern California, SoFi doesn't have much in common with SVB. Read on to see why buying SoFi on the dip looks like a smart move right now.

SoFi and SVB are not the same

SoFi was founded in 2011 by Stanford students around 15 miles from SVB's headquarters in Santa Clara, California. Fortunately for SoFi investors, geography is about the only thing these two banks have in common.

SoFi is a consumer-focused bank while SVB famously lent to tech start-ups. In recent years, those businesses were flush with cash and didn't do much borrowing. To compensate, SVB bought some Treasury notes with excess customer deposits.

Long-term Treasury notes lost a lot of their value when the Federal Reserve started raising interest rates. At the same time, venture capitalists started getting stingier and SVB's clients started withdrawing more cash. On Friday, March 10, SVB was closed by California's Department of Financial Protection and Innovation, which appointed the Federal Deposit Insurance Corporation (FDIC) as receiver. That was just two days after warning investors it had to sell some assets at a steep loss to shore up liquidity.

SoFi Technologies is extremely unlikely to experience a similar run for three reasons. First, the vast majority of SoFi's deposits are FDIC-insured up to $250,000 while most of SVB's clients had much larger sums in their accounts. Second, SoFi is well capitalized with a tier 1 capital ratio of 14.6%. This is higher than Wells Fargo, a "too-big-to-fail" institution subject to strict government oversight.

Finally, Treasury Secretary Janet Yellen has already agreed to fully protect SVB's uninsured depositors. With the government clearly prepared to protect depositors, a run on a consumer bank like SoFi seems highly unlikely.

Signaling confidence

To show investors how confident he was about his bank's ability to weather the storm that sank SVB, SoFi's CEO, Anthony Noto, bought nearly $1 million worth of his company's stock for his own portfolio on Friday, March 10.

Noto was also likely encouraged by SoFi's outstanding performance. In the fourth quarter of 2022, the all-digital bank added nearly half a million new members, bringing the total up to 5.2 million. That's 51% more members than the bank had at the end of 2021.

SoFi has three operating segments, lending, financial services, and a technology platform that its business-to-business clients use to manage over 130 million third-party accounts. All three segments reported record revenue in the fourth quarter.

Know the risks

Right now, SoFi stock is trading at around 18.8 times the midpoint of management's estimate for adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) in 2023. That's a reasonable EBITDA multiple for a company that isn't growing very fast, but SoFi expects revenue to soar 25% to 30% higher in 2023.

The stock looks like a bargain, but investors should know that the company is still losing money according to generally accepted accounting principles (GAAP). While its lending and technology segments contribute significant profits to the bottom line, the financial services segment uses heaps of incentives to attract new depositors. As a result, SoFi posted a GAAP net loss of $40 million in the fourth quarter of 2022.

Management has dialed back new member incentives enough to forecast profits on a GAAP basis by the fourth quarter of 2023. If profits appear as predicted, patient investors who buy this stock at recent prices could realize market-beating gains. Of course, any unexpected deviation from the guidance provided could cause the stock to tank. SoFi stock is a buy right now but only for investors prepared to make it a relatively small part of a diversified portfolio.