Meme stocks drew the attention of the investment world during the pandemic, when shares of what looked like financially unsound businesses would attract tons of interest on social media and skyrocket in price in no time. AMC Entertainment and GameStop were the original starters of this craze.

But while these companies are usually not of the highest quality, not all meme stocks should be completely written off. In fact, some of them have the potential to be solid long-term investments. SoFi Technologies (SOFI 2.06%) is one such business, and this fintech stock has legitimate upside.

Uniquely positioned

In the ridiculously competitive banking industry, SoFi has found a way to stand out thanks to its online-only offering. The company operates no brick-and-mortar branches like JPMorgan Chase, Bank of America, and Capital One, for example. The business was built with technology as a key focus from the start, and this has provided consumers with a better user experience, one in which handling finances is more seamless and frictionless.

Unsurprisingly, a digital bank like SoFi has attracted a younger demographic. But what's even better, these customers are in better-than-average financial shape. The average student and personal loan borrower has a FICO score above 744 with an average annual income greater than $167,000. By initiating a relationship with these individuals early in their professional lives, SoFi has the opportunity to generate revenue from these customers for many years.

It's also encouraging that the number of products that a typical customer uses has gradually increased over time. In Q3 2020, the average SoFi member was signed up for 1.37 products, a figure that has climbed to 1.5 in the most recent quarter (Q3 2023 ended Sept. 30). Without a doubt, figuring out ways to cross-sell products is a focal point for the executive team.

Strong performance

The key to SoFi's story has been its tremendous growth. In the most recent quarter, revenue and members increased 27% and 47%, respectively. To be fair, this was a slowdown compared to the rapid gains in previous periods, but it's still impressive given the uncertain macroeconomic backdrop.

One of the more noteworthy trends that shareholders should be paying attention to this year is the growth of deposits that SoFi has been seeing. The regional banking crisis from March highlighted just how important it is for customers to have trust in the institutions where they park their hard-earned savings. At the end of 2022, SoFi had $7.3 billion in deposits. As of Sept. 30, this number totaled $15.7 billion. In fact, it was up 24% just in the last three months.

Of course, offering one of the best rates on savings balances, as well as expanded FDIC insurance to cover up to $2 million in balances, definitely helps. CEO Anthony Noto mentioned that 98% of deposits were insured.

In the last quarter, SoFi posted a net loss of $267 million. This was significantly higher than the $74 million loss registered in the year-ago period. This is a trend that shareholders don't want to see, but it's worth pointing out that Q3's loss was impacted by a one-time non-cash impairment of goodwill. In the current quarter, the management team expects SoFi to be profitable on a generally accepted accounting principles (GAAP) basis, which would be a huge milestone for the company.

Attractive valuation

With a gain of 46% (as of this writing), SoFi shares have outperformed the Nasdaq Composite index's 30% rise this year. However, they remain 74% below their all-time high price, which was set in February 2021.

So, investors can buy the stock now at a price-to-sales multiple of 3.2. That seems like a reasonable valuation to pay for a business that has so many positive attributes.