Better Growth Stock: PayPal vs. SoFi Technologies

Dan Victor, The Motley Fool

Mon, May 5, 2025, 5:30 AM 5 min read

• PayPal and SoFi Technologies each reported better-than-expected first-quarter earnings.

• PayPal's efforts to improve profitability appear to be working, while SoFi is capitalizing on an expanding lineup of offerings.

• One of these fintech leaders offers a stronger growth outlook, which could be the key for its stock to outperform.

Companies using technology to disrupt the traditional financial services sector stand to capitalize on a significant growth opportunity. PayPal (NASDAQ: PYPL) and SoFi Technologies (NASDAQ: SOFI) are recognized as fintech leaders that have found success in carving out distinct niches within the evolving landscape.

Despite their volatile stock prices during the past year, both companies' strong product innovation and ongoing expansion efforts position them to reward shareholders over the long run.

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Let's discuss which of these fintech growth stocks is the better buy for your portfolio right now.

With a history spanning more than two decades, PayPal pioneered online payment processing as an early disruptor to legacy banking systems. Today, the company facilitates transactions for 436 million active customers in more than 200 countries. PayPal has evolved by focusing on differentiated and value-added solutions to drive profitability rather than emphasizing user growth and low-margin activities. The strategy appears to be working.

In the recently reported first quarter, even as the number of total payment transactions declined by 7% year over year, the company's key performance metric of total payment volume (TPV) climbed by 3% year over year, generating a 7% increase in transaction margin.

Branded checkout, representing payment experiences where PayPal's brand or the Venmo platform are central to the transaction, has been a key part of the TPV growth. PayPal is also seeing traction in its market with its merchant-oriented payment service provider (PSP) offerings. Even more impressive was the 23% increase in adjusted earnings per share (EPS) compared to the prior-year quarter.

Management expects the trends to continue, targeting full-year transaction margin growth between 4% and 5%, alongside a 6% to 10% increase in adjusted EPS over 2024. Where PayPal shines as a growth stock, and part of its allure as an investment opportunity next to SoFi Technologies, is its attractive valuation. Shares of PayPal trade at a forward price-to-earnings (P/E) ratio of just 13 based on analysts' average estimated 2025 EPS. That's well below SoFi's forward P/E of 44.