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Paypal and Sofi Technologies each reported more than expected first-quarter revenue.
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Paypal's efforts to boost profitability seem to be working, while Sofi is leveraging its expanding lineup.
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One of these fintech leaders offers stronger growth prospects, which could be the key to its stocks outperforming the market.
Companies that use technology to undermine the traditional financial services sector will take advantage of huge growth opportunities. PayPal (NASDAQ: PYPL) and SOFI technology (NASDAQ: SOFI) Recognized as fintech leaders, they have achieved a successful lead in the evolving landscape.
Despite the volatility of stock prices over the past year, the strong product innovation and continued expansion efforts of both companies have enabled them to reward shareholders in the long run.
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For two decades of history, Paypal has pioneered online payment processing as an early destroyer of traditional banking systems. Today, the company has facilitated transactions with 436 million active customers in more than 200 countries. PayPal drives profitability by focusing on differentiation and value-added solutions rather than highlighting user growth and low-profit activity. The strategy seems to be working.
In the first quarter of the most recent reports, the company's main performance metric for the main payment volume (TPV) increased by 3% year-on-year, thus increasing transaction margins by 7%.
Branded Checkout represents PayPal’s brand or Venmo platform that is at the heart of transactions and has been a key part of TPV growth. PayPal also sees appeal in its market with its commercially oriented payment service provider (PSP) products. Adjusted earnings per share (EPS) increased by 23% compared to previous grades.
Management expects the trend to continue with full-year trading margin growth between 4% and 5%, while adjusted EPS exceeds 2024, with adjusted EPS up 6% to 10%. Paypal emits a portion of growth stocks, while part of the investment opportunity next to SOFI Technologies is its attractive valuation. According to analysts' average estimate of 2025 EP, the stock ratio of stock trading stocks with a forward price (P/E) ratio of 13 is only 13. This is much lower than Sofi's previous p/e 44.
Investors have good reasons to pay for PayPal's ability to further consolidate its market share and have good reasons to buy and hold the stock for a long time.
Sofi Technology's $14 billion market cap makes it smaller compared to PayPal's $65 billion valuation, but it's growing faster in the more profitable fintech space.
The company stands out with a comprehensive approach to personal finance, turning its expertise in loan products such as personal loans and mortgages, such as personal loans and mortgages, into a one-stop financial services store. Sofi, able to cross-sell its 10.9 million member base on a wider range of products including bank accounts, credit cards and investment options, has translated into a rapidly expanding and diversified technology platform.
In the first quarter, net income soared 33% from the net income a year ago. Perhaps the biggest development of Sofi is its ongoing diversification offering to lend products to more fee-based financial services, which now accounts for 41% of its business, up from 37% last year. This is important because it supports more durable income and high-quality cash flow compared to the credit exposure of the loan portfolio. In fact, profitability is accelerating, with management adjusting earnings per share for the full year between $0.27 and $0.28, almost double the $0.15 in 2024.
Ultimately, Sofi's prospects help justify the valuation premium of its stock order. It is difficult to find better fintech growth stocks that believe Sofi represents future investors in banking and is still in the early stages of fulfilling its platform’s potential.
Although I predict that PayPal and Sofi Technologies stocks will rise next year and beyond, I choose better growth stocks. The combination of Sofi fast platform membership growth and earnings momentum should enable its stock to outperform the ball in a resilient macroeconomic environment. Another quarter where financial results exceeded expectations could be key to Sofi's stock's retraction of its previous highs, allowing investors to consider increasing opportunities to diversify their portfolios.
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Dan Victor has no position in any of the stocks mentioned. Motley fool has a place and recommends PayPal. Motley Fool recommends the following options: January 2027, $42.50 Paypal phone calls and June 2025, $77.50 Paypal phone calls. Motley Fool has a disclosure policy.
Better growth in stocks: Paypal vs. Sofi Technologies was originally published by Motley Fool